The euro has rebounded in European trading against the dollar, recovering from its two-month nadir in response to discouraging US economic data.
This data has reinforced the belief that the Federal Reserve will refrain from implementing further interest rate hikes this year, as the US economy appears to be heading toward a recession in the latter half of the year.
The EUR/USD pair gained 0.2%, reaching 1.0877, with a session low of 1.0858. This follows a 0.2% increase observed yesterday, which lifted the euro away from its two-month low of 1.0802.
The euro had previously declined to its lowest point in two months after the release of lackluster European manufacturing and services data. This weakened the prospects of an interest rate hike by the European Central Bank (ECB) next month.
Market participants are now anticipating a speech by ECB President Christine Lagarde scheduled for tomorrow. This speech is expected to offer insights into the future trajectory of European monetary policies.
On Thursday, the dollar index recorded a 0.1% decline, marking its second consecutive session of retreat from a two-month high of 103.98 against a basket of major counterparts.
The dollar ceded ground in response to discouraging US data related to the manufacturing and services sectors in August, which suggests that the US economy could be on the brink of recession.
The US Composite Purchasing Managers’ Index (PMI), which amalgamates both the manufacturing and services PMI, fell to 50.4 in August from July’s 52, marking the steepest decline since November 2022.
Such data might compel the Federal Reserve to terminate the current cycle of policy tightening once and for all.
