SINGAPORE/LONDON (Reuters) -The euro slid to a more than two-month low on Thursday ahead of an expected European Central Bank rate cut, while the dollar hit its highest in 11 weeks on the prospect Trump, whose policies the market considers more bullish, will win the U.S. election.
The yen struggled near the 150 per dollar level and was last at 149.765.
Sterling firmed slightly against the euro to 83.54 pence but was still close to Wednesday’s two-month low against the dollar that followed lower-than-expected UK inflation data.
Weak economic data in the euro area and dovish comments from ECB officials have prompted traders to price in that the ECB will deliver a third rate cut since June, diminishing the euro’s appeal.
The ECB is expected to cut its deposit rates by a quarter-point when it publishes its policy decision at 1215 GMT followed by a news conference from President Christine Lagarde that will be parsed for clues on future moves.
“ECB might not commit to further rate cuts necessarily and I don’t think that the impact on the euro will be dramatically negative,” said Roberto Mialich, forex strategist at UniCredit.
Money markets almost fully price in three further reductions through March 2025 to tame the most protracted inflation in the euro zone in a generation.
The euro slipped 0.1% $1.085325, falling for the seventh straight session.
“The euro has become much more fragile, especially as it continues to get closer to 1.08 or 1.0780,” because a definitive break below those levels would represent a complete wipe out of gains since August and could add to selling pressure, Mialich said.
In the broader market, the dollar scaled an 11-week high against a basket of peers at 103.65.
The dollar has drawn support from a run of upbeat data on the U.S. economy, which has in turn caused traders to reduce their expectations of Fed rate cuts, but also on the higher chances of a victory by Republican presidential candidate Donald Trump at next month’s election.
“His core policies on tariffs, immigration, and taxes would produce a more inflationary outlook in the U.S., diminishing prospects for aggressive Fed rate cuts over the cycle,” said Thierry Wizman, global FX and rates strategist at Macquarie.
Analysts expect the dollar to strengthen in the event of a Trump victory and for bonds to come under pressure.
CHINA DISAPPOINTMENT
A news conference in Beijing focused on measures to prop up the country’s property sector.
However, it failed to excite markets as policymakers essentially reiterated their commitment to boost the housing market, but did not announce any of the new significant measures some investors hope for.
The onshore yuan reversed early gains and eased 0.05% to 7.1225 per dollar, while its offshore counterpart was last a touch higher at 7.1358 per dollar.
“From today’s press conference, we think few incremental policies on boosting home demand were announced, as the minister reiterated municipal governments’ autonomy to relax buying curbs,” said Morningstar equity analyst Jeff Zhang.
The Australian dollar, often used as a liquid proxy for the yuan, gained just 0.2% to $0.66780, as the disappointment from China offset some of the Antipodean currency’s strong gains from an upbeat jobs report at home.
Stronger-than-expected jobs data for September led traders to pare back bets on a first interest rate cut from the Reserve Bank of Australia (RBA) in December.
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