Euro Under Pressure as Demand for the Dollar Returns

The euro weakened once again, falling below US$1.12 in trading on November 6, following a brief stint at a one-month high. The pressure stems from a massive sell-off in global technology stocks, which has prompted investors to seek out safe-haven assets, thereby driving up demand for the US dollar.

Sentiment toward AI-related stocks has also soured, as the Democratic Party’s significant gains in the US midterm elections have fueled concerns regarding stricter regulations. Such measures could potentially slow the expansion of the AI ​​industry and dampen economic growth prospects.

Meanwhile, the market remains focused on the policy direction of the European Central Bank (ECB). ECB President Christine Lagarde stated that the central bank is closely monitoring economic data to determine whether an interest rate hike is warranted in December. Previously, the ECB had held its deposit rate steady at 2.5%.

Expectations for a rate hike have intensified following a rise in Eurozone inflation to 4% in October—the highest level in three years—driven largely by surging energy costs. The market is now pricing in two interest rate hikes between now and mid-2027, with the first potentially arriving as early as December.

Newsmaker Analysis: The euro is currently facing pressure from a strengthening dollar and heightened demand for safe-haven assets, even though the prospect of ECB interest rate hikes provides some fundamental support. Should global risk sentiment deteriorate further, the euro is likely to remain under pressure. Conversely, increasingly hawkish signals from the ECB could create room for the euro to regain strength. (srh)

Source: Newsmaker.id