Euro plumbs one-week low amid a bearish outlook

Euro fell in European trade on Friday against a basket of major rivals, sharpening losses for the second day against the dollar and plumbing a week low, as markets expect US interest rates to remain high for longer than European rates. 

Recently, the odds of an early interest rate cut by the European Central Bank in April or June surged, while the odds for such a cut by the Federal Reserve tumbled. 

EUR/USD

EUR/USD fell 0.1% to 1.0873, with a session-high at 1.0886, after closing down 0.6%, the first loss in three days following strong US producer prices and unemployment claims data. 

Weekly Trades

The pair is down 0.6% so far this week, on track for the first weekly loss in a month on renewed concerns about the widening interest rate gap between Europe and the US.

Declining Outlook 

The SEB banking group said in a research memo that the time is prime for the EUR/USD pair to decline in upcoming weeks.

The group’s analysts are pointing to the conditions supporting an earlier interest rate cut in Europe compared to the US as a basis for their prediction. 

The analysts believe that a breach of the recent range will underpin the dollar throughout the spring, with the group now expecting the EUR/USD to hit 1.07 in about a month before rebounding back to 1.10 in the fourth quarter.  

As the Federal Reserve prepares to launch its own policy easing, likely from June, it’s expected that the euro will gain momentum on the dollar and recoup all of its recent losses.