The EUR/USD currency pair is trading near its two-year lowest value of $1.04, around $1.051. Recent reports suggest a slight improvement in private sector activities, mainly due to better service sector performance, even though manufacturing continues to lag, especially in major economies like Germany and France.
Germany Faces Election After Vote of No Confidence
Germany’s Chancellor has recently lost a parliamentary vote of confidence, leading to expectations of upcoming elections early next year. Meanwhile, France’s government is working hard to approve its budget for 2025.
Interest Rates Drop in the US and Europe
On the monetary side, the U.S. Federal Reserve is anticipated to reduce interest rates by 0.25% this week, with future cuts likely to be more gradual. Last week, the European Central Bank (ECB) also reduced its rates by 0.25% for the fourth time, carefully approaching any further rate cuts.
However, experts think the ECB might have to make more significant cuts quickly to help the struggling Eurozone economy.