- EUR/USD is trading at the lowest level since May 2017.
- Eurozone growth concerns and dovish ECB expectations seem to be hurting the euro.
EUR/USD has dropped to 33-month lows on dovish European Central Bank (ECB) expectations.
The pair is currently trading near 1.0865 – the lowest level since May 2017 reached on Wednesday.
ECB rate cut bets rise
Eurozone’s industrial output suffered its steepest drop in four years in December, the official data released on Wednesday showed
Further, German manufacturing recession looks far from over with factory orders falling by 2.1% in December.
As a result, money markets are now pricing about six basis points of rate cut by the end of 2020, versus a zero probability seen a month earlier, according to Bloomberg.
Alongside that, the US dollar is attracting haven flows amid coronavirus fears. Also, the US economy is doing relatively well, as highlighted by last week’s Nonfarm Payrolls report.
All in all, the path of least resistance looks to be on the downside. The common currency may continue to lose altitude, having found acceptance under the key support at 1.0879. The downside may gather pace if the US Consume Price Index (CPI) for January, due at 13:30 GMT, beats estimates by a big margin, forcing markets to price out prospects of additional easing by the Federal Reserve. The pair may also take cues from the final German CPI for January, scheduled for release at 07:00 GMT.