The euro strengthened on Monday following the release of German inflation data, while commodity-linked currencies gained amid hopes for a recovery in China’s economy. Meanwhile, the Japanese yen remained steady as markets reacted.
On the other hand, the U.S. dollar remains close to its lowest level of the year against a basket of global currencies, as markets await the non-farm payrolls report due on Friday. This report is expected to determine the resilience of the U.S. economy and the potential need for further interest rate cuts in the coming months.
These expectations come after a series of U.S. monetary decisions, where the Federal Reserve recently cut interest rates by 50 basis points, leading to a decline in the dollar against most major currencies in recent weeks.
The euro rose to $1.1194, gaining 0.25% on the day, after German data showed a slight decrease in inflation. However, the decline was not as significant as recent figures from France and Spain.
Recent reports on prices in France and Spain, along with signs of weak economic growth, have prompted several major investment banks to revise their European Central Bank forecasts, now expecting a rate cut in October in addition to the anticipated move in December.
This has led to the euro weakening against most other currencies, while remaining relatively stable against the U.S. dollar, despite China’s economic stimulus, which would typically strengthen the euro due to the trade ties between the eurozone and Beijing.
Elsewhere, the Australian and New Zealand dollars hit their highest levels of 2024, driven by expectations of an improvement in China’s economy due to rate cuts and financial support measures. The Australian dollar surged to a 20-month high of $0.6941, while the New Zealand dollar rose to $0.6375, its highest level in over 14 months. Both currencies gained against European currencies, with the euro falling to its lowest level since July at A$1.6082.
China’s recent stimulus package also drove a significant rally in the yuan last week, with the currency surpassing the 7 yuan per dollar mark in offshore trade on Friday, while it stabilized at 7.0115 in onshore trade on Monday.
As for the British pound, it rose 0.2% against the dollar to $1.3402, while the Swiss franc weakened as the euro gained 0.7% to 0.9441 francs, and the dollar climbed 0.4% to 0.8437.
