Euro hurt by stalling Germany and Spanish uncertainty
European currency on Thursday suffered its worst day in over six weeks, falling 0.6 per cent to a 22-month low of $1.1141
The euro languished near a 22-month low on Thursday, weighed down by ailing growth in Germany and the spectre of political uncertainty in Spain.
A surprise drop in German business morale has highlighted the divergence between economic data in the United States and the eurozone.
The European Central Bank in March pushed out the timing of its first post-crisis rate hike until 20:20 and its policymakers are still expressing worries about economic growth.
That is impacting the euro which on Thursday suffered its worst day in over six weeks, falling 0.6 per cent to a 22-month low of $1.1141.
It traded flat on Thursday at $1.1154.
"Political uncertainties combined with economic concerns are a rather bad cocktail for the euro. In particular if the economy on the other side of the Atlantic is humming," Antje Praefcke, an analyst at Commerzbank, wrote in a note to clients.
Mr Praefcke said a polarised election in Spain on Sunday could further dampen the euro's prospects.
The vote is being fought on emotive issues including gender equality and national unity following Catalonia’s failed 2017 independence bid.
Market participants awaited policy decisions by the Swedish and Turkish central banks later on Thursday.
Sweden's Riksbank is likely to keep its benchmark rate unchanged and may be forced to delay plans to tighten policy later in 2019, a Reuters poll of analysts published on Tuesday showed.
The Swedish crown was down 0.2 per cent at 9.4190 kroner, a six-week low, ahead of the decision.
"The Riksbank may push further out the timing of the next rate hike, and also the market may speculate it's too early for a rate cut by the Turkish central bank," said Mizuho's Yamamoto. "That could be a negative for these currencies and positive for the dollar."
The greenback rallied to a 23-month high of $98.189 against a basket of key rivals overnight while gaining more than half a per cent, largely propelled by the euro's weakness. The index last traded 0.15 per cent lower at 98.027.
Investors will watch the release on Friday of US gross domestic product data for the first three months of 2019, for signs of whether the United States remains stronger than other leading economies.
Updated: April 25, 2019 12:05 PM