Euro showing weakness at the start of September

The Euro's downward trajectory against the US dollar has persisted for eight consecutive weeks, resulting in an overall decline of approximately 5%.

Currency Pair

Currently, the currency pair is testing a crucial support level at 1.07.

The factors contributing to this decline and the weakness of the Euro bear resemblance to the challenges faced by the pound, primarily revolving around uncertainties regarding interest rate hikes and the formidable performance of the US dollar.

The forthcoming European Central Bank (ECB) rate decision, scheduled for next week, looms with uncertainty. ECB President Lagarde has recently refrained from providing any clear indications about whether the ECB will maintain the status quo or opt for another 25-basis points hike. The expectation now leans towards an increase.

A series of underwhelming European services Purchasing Managers' Index (PMI) figures, including Spain, France, Italy, and the overall Eurozone, failed to meet expectations.

Germany was the exception, posting an as expected. Moreover, recent data confirmed a 0.2% decline in regional retail sales over the past month, accompanied by another drop in German factory orders. EU growth figures for Q2 also fell short of estimates, with GDP increasing by a modest 0.1%, compared to the expected 0.3% growth.

The ECB's communication during the upcoming week will be closely monitored, potentially overshadowing the rate decision itself. Market participants are eager to discern the central bank's stance and outlook amid this challenging economic backdrop.

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