LONDON: The euro fell to a one-week low against the dollar on Wednesday towards the lower end of this year's range, weighed down by expectations of monetary policy easing and investors' preference for the greenback.
Analysts say it is unlikely it will recover in the short-term before a European Central Bank meeting next week where policymakers might unveil plans for fresh monetary stimulus.
Nearly two interest rate cuts of 10 basis points are priced in by money markets in 2019 and a worse-than-expected ZEW survey of German economic sentiment this week put further pressure on the struggling euro, one of the worst performing currencies this week, along with sterling.
The common currency was steady at $1.1212 but it dropped earlier to $1.1200, the lowest since July 9. It has fallen by 2.2% so far this year against the dollar as it traded between $1.15 and $1.11.
As the European Central Bank meeting on July 25 approaches, the euro is likely to continue trading around current levels and possibly below $1.12, said Kenneth Broux, head of corporate research at Societe Generale.
Europe is underperforming and "I would favour long dollar in this environment," he said.
The pound slipped to another 27-month low of $1.2382 on a combination of no-deal Brexit jitters and a broad-based stronger dollar. It also hit a fresh six-month low against the euro at 90.51 pence.
The dollar rose on Tuesday after stronger-than-expected June U.S. retail sales data dampened expectations that the Fed could cut interest rates by 50 basis points (bps) rather than 25 bps at its month-end policy review.
An index which tracks the dollar against a basket of six major currencies surged to a one-week high of 97.44 earlier, but it retreated back slightly and was last flat at 97.37.
The United States still has a long way to go to conclude a trade deal with China but could impose tariffs on an additional $325 billion worth of Chinese goods if it needed, Trump said. But the impact of Trump's comments on other major currencies was limited.
"The U.S.-China trade row is not at the centre of the market's attention right now. Focus is on the Fed's policy, U.S. data and their impact on yields," Junichi Ishikawa at IG Securities said.
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