It plummeted to its lowest point in a week after analysts continued to expect that the European Central Bank would launch a stimulus package.
The Bank, which meets next week to discuss the issue, is increasingly expected to announce a raft of measures designed to get the sluggish Eurozone economy into action.
The euro, which hit $1.1214 in its pair against the US dollar, is not expected to make any significant upward moves until the hurdle of the ECB meeting is out of the way.
The currency’s performance against the dollar represents a one-week low. It was also fuelled in part by the release of a ZEW economic sentiment survey in Germany yesterday, which showed a drop.
It was unable to see any relief even in the face of another statistical release which showed that inflation in the region which uses the euro was up by well over a percentage point.
Elsewhere, the US dollar was buoyed by news that retail sales data was on the up – despite expectations that it would not be rising by such a high amount. This has led to speculation that the Federal Reserve will not cut interest rates by fifty basis points, or by 0.5%, when it meets later this month. It may instead cut rates by just 0.25%.
However, some analysts are refusing to take any chances. Opinions on whether or not the Federal Reserve will do this have fluctuated in recent weeks, and the chances have risen and fallen regularly. The meeting takes place on July 30th and July 31st.
The dollar index, which measures the currency’s performance in relation to several major currencies from across the globe, went up to 97.44 at one stage – although it was later recorded going back down.
The British pound saw particularly acute losses over the course of the day. It went down to its lowest point in 27 months across the course of the day, fuelled largely by political tensions.
Boris Johnson and Jeremy Hunt, who are the two candidates vying to succeed Theresa May as leader of the Conservative Party and Prime Minister, are due to find out on Tuesday who will succeed them.
There is no clear path forward for the new Prime Minister to leave the European Union in an orderly fashion. A no deal Brexit, which is feared by markets, could be on the cards.
Speculation that a general election will occur has also taken place, as the parliamentary arithmetic as it currently stands makes it difficult for a majority for one way forward to be formed.
In its pair against the US dollar, the pound hit $1.2382.
Against the euro, it fared little better. Despite the euro’s own woes, the pound still managed to crash to a half-year low point – a development which will have spooked many pound traders left wondering when the decline will end. It was recorded at 90.51 pence in the GBP/EUR pair, which spells significant worry for many pound traders.