Euro Declines as German Inflation Data Surprises Markets

The euro fell against the dollar following German inflation data that suggested a decline in national inflation. This triggered investor speculation about ECB interest rate cuts. In the broader market, the dollar rose, while the markets anticipated U.S. and New Zealand monetary policy shifts.

The euro weakened against the dollar after new data indicated falling inflation in six significant German states, leading investors to speculate on potential interest rate cuts by the European Central Bank (ECB). Preliminary data released on Thursday suggested a noticeable decline in national inflation for August.

Spain reported its slowest inflation pace in a year, influencing the euro's decline by 0.4% to $1.1077 from a previous position of $1.1128. The single currency had touched a 13-month high of $1.1201 last Friday. Money markets adjusted, now pricing in 67 basis points of ECB rate cuts for 2024, an increase from around 63 basis points before the data release.

In the broader market, the U.S. dollar rose, bouncing back from Wednesday's dip. The dollar has fallen about 2.9% this month, headed for its most significant monthly decline in nine months. Fed Chair Jerome Powell's remarks at Jackson Hole last week have fueled expectations for imminent U.S. rate cuts, though some analysts believe the dollar's reaction was exaggerated.

(With inputs from agencies.)