On Thursday, the Euro fell sharply against the dollar, marking its third consecutive day of decline and falling to a five-week low below 1.0790. This downward trend for the currency pair has been present since the latest jobs report was released on March 8. Subsequently, the pair failed to reach the 1.10 level.
FxPro senior analyst Alex Kuptsikevich pointed out that the continued decline of the Euro against the dollar has turned the initially neutral technical outlook negative, forming a "death cross". The 50-day moving average is about to fall below the 200-day moving average.
The still robust economy continues to favor the dollar, pushing back the expectation of the first rate cut from March to June, nearly aligning it with the European Central Bank. Notably, the European Central Bank is expected to cut rates four times, while the Federal Reserve is anticipated to cut rates two to three times. The dollar is benefiting from this in the foreign exchange market.
Meanwhile, Europe has also reported that its domestic demand is weak. Germany's retail sales fell 1.9% in February, marking the fourth consecutive month of decline. It fell 2.7% year over year. The latest data is a five-month low, but more concerning is the worsening trend.
This has not stopped the DAX index from rising 10% since the beginning of the year, doubling the Dow Jones index, and making new highs every week since the beginning of February. The weakness of the Euro has been an important factor affecting the strong performance of the German market, although it is not the main factor.
The European Central Bank's willingness to relax policy more aggressively than the Federal Reserve could be counteracting the Euro, benefiting German stock exporters. Now, for Germany, it's like a seesaw ride.
