The euro is experiencing the longest period of a downward movement since its creation. Such a slump could be partially explained by expectations of the end of monetary policy tightening.
This autumn, the single currency is showing a considerable decline. It has been falling against the US dollar for ten weeks in a row. Traders have stuck ahead of the end of the hiking cycle. According to the statistical data, this is the longest period of a decline in the euro since the moment the currency was introduced in January 2002. On July 18, the euro touched its local high of 1.1277 against the greenback and started to fall rapidly. By the moment, the single currency has lost almost 6% and is trading at the level of 1.0665 dollars per unit.
In the past two months, traders have been actively selling the euro amid expectations of an end to the ECB's cycle of rate increases. The ECB may take such a decision because of the worsening economic situation in Europe. However, on September 14, the European Central Bank raised the key rate once again, failing to meet analysts’ predictions. Notably, in their comments, ECB officials emphasized that the benchmark rate had already reached its peak. At the press conference, the regulator noted that the key interest rate had already approached the level that may return inflation to the target of 2%.
Just after the ECB announced its key rate decision, the euro tumbled. "The ECB has just given dollar bulls another reason to start shorting the euro," Dipak Shah, head of G-10 FX options trading at Nomura Holdings Inc., said. "We'd expect to see euro shorts to gain momentum, not just against the dollar, but against other currencies as well," he added.
