Euro Near Nine‑Month Low as Fed, ECB Policies Diverge

Date: 24‑08‑2021

Source: The Wall Street Journal

Forecasts for slower growth in the eurozone have investors betting interest rates will stay low for longer

The European Central Bank has signaled that it won’t tighten policy as quickly as its U.S. counterpart.

The euro is trading near its lowest level against the dollar in nine months as investors bet that the eurozone will maintain lower interest rates and have a slower economic recovery than the U.S.

The European Central Bank has indicated that it intends to keep financial conditions loose for the foreseeable future as it cushions the eurozone’s economic recovery. In contrast, Federal Reserve officials have signaled they are on track to begin reversing their easy‑money policies later this year.

The policy split means investors may get paid more to hold U.S.‑dollar assets like Treasurys than they would eurozone assets, where government bonds in Germany and some other countries already have subzero yields.