The euro fell below $1.05, approaching its two-year low of $1.04 from late November, after the European Central Bank (ECB) cut its benchmark interest rates, as expected, and signaled further rate reductions.
Euro fell after ECB rates cut
All three main rates were lowered by 25 basis points, marking the fourth reduction in the current cycle, in response to continued evidence of weaker underlying inflation within the eurozone. Consequently, the Governing Council removed its previous statement that interest rates need to be restrictive to combat inflation.
Chaos in France and Germany also hit euro
The ECB also revised its GDP growth projections downward, including a 0.1 percentage point reduction for the current year to 0.7%, and a 0.2 percentage point cut for next year to 1.1%, significantly lagging behind U.S. growth expectations. Additionally, the euro has faced pressure from political uncertainties in France and Germany.
