By William Watts, MarketWatch
The euro dropped to a more-than-two-year low versus the U.S. dollar Friday, reflecting worries over Europe’s economic outlook and angering President Donald Trump — who used it as a reason to bash the Federal Reserve once again.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0092% was down 0.8% at $1.0973, slipping below $1.10 for the first time since May 2017, according to FactSet. The euro came under renewed pressure this week, falling 1.6% to leave it down around 4.3% versus the U.S. unit for the year to date.
Euro weakness was once again on Trump’s radar, who took to Twitter to complain:
The slump also got some blame for the stock market’s pullback from early gains. Major indexes were mostly higher, with the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.09% up around 40 points, or 0.1%, while the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.18% was marginally higher.
Trump has previously taken aim at the European Central Bank and European politicians, indicating he thinks they’ve moved to deliberately weaken the euro to undercut U.S. exporters. But economists note that with the eurozone economy looking weak — and Germany’s economy, Europe’s largest — flirting with recession, pressure on the shared currency is no surprise.
In fact, Boris Schlossberg, managing director of FX strategy at BK Asset Management, argued that in a sense “policy inertia” on the fiscal and monetary front in Europe in the face of a slowing economy was exerting pressure on the shared currency.
German politicians have opened the door to potential fiscal stimulus, but only once the economy has tipped into recession. Meanwhile, a handful of ECB policy makers have pushed back against hints from other officials about the need for an aggressive move at the bank’s September meeting, perhaps denting expectations for an aggressive round of rate cuts and renewed quantitative easing.
But overall, a sense the ECB might not deliver as aggressively as anticipated should support the euro, analysts said.
Signs of division among policy makers means “there is risk of Fed-like disappointment or under-delivery,” said Brad Bechtel, analyst at Jefferies, in a note. The market “wants a decisive ‘do whatever it takes’ moment, but I am not so sure we’ll get that.”