Investing.com – The US dollar fell on Wednesday, adding to losses from the previous day, while the euro rose despite signs of a weakening euro zone economy.
As of 4 a.m. ET (9 a.m. GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading down 0.1% at 100.080 after falling more than 0.5% in the previous session, its biggest one-day percentage drop in a month.
The dollar continues to fall
The US dollar has struggled since the rate cut cycle began with a massive 50 basis point cut earlier this month.
Data released on Tuesday showed U.S. gross domestic product unexpectedly fell in September, raising concerns about further growth in the world's largest economy, especially as the labor market shows signs of contracting.
“Yesterday was a surprise move, with US consumer confidence readings coming in much weaker than expected,” ING analysts said in a note. “The US consumer has been very resilient for a long time, so markets are very sensitive to this theme.”
According to the CME FedWatch tool, the market is now pricing in a 59.5% probability of a 50 basis point rate cut at the Fed's next policy meeting, up from just 37% a week ago.
Euro nears 13-month high
In Europe, the euro benefited from a weaker dollar, trading 0.1 percent higher at 1.1188, hovering near a 13-month high hit last month, despite data showing weakness in the euro zone economy.
“With very little planned on the European calendar today, EUR/USD is likely to trade in a range. However, the fact that EUR/USD is above 1.1100 is encouraging for us modest EUR/USD bulls,” ING added.
It fell 0.1% to 1.3394, its lowest level since March 2022.
The pound has received support from the Bank of England, which is widely seen as less likely to cut interest rates as aggressively this year than the Federal Reserve.
Megan Green of the Bank of England is due to speak later in the session and her comments will be examined for further clues about the timing of any further monetary easing by the British central bank.
The euro rose 0.1% to 10.1041 ahead of the Swedish central bank's latest policy meeting.
The central bank is widely expected to cut rates by 25 basis points later in the day, but Riksbank Governor Erik Tedin has not ruled out a half-point cut.
The yuan approaches record levels
The yuan weakened 0.1% to 7.0238, approaching its lowest since May 2023, after the Chinese government announced a series of stimulus measures on Tuesday, including cutting bank reserve requirements and lowering mortgage rates.
It rose 0.4% to 143.81, while it fell 0.2% to 0.6878, just below a 19-month high after a sharp rise the previous day.
Data released on Wednesday showed inflation fell to its lowest level in three years in August, but the decline in core inflation was less pronounced.
The Fed kept interest rates on hold on Tuesday and said that while inflation is expected to fall in the near term, it does not expect price pressures to reach its target range sustainably until 2026.
