Euro edges down as EZ avoids recession, dollar rises ahead of Fed decision

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Key Points

LONDON/TOKYO (Reuters) The euro edged lower on Tuesday after data showed the euro zone narrowly avoided a technical recession in the fourth quarter, while the U.S. dollar edged higher, as traders awaited the Federal Reserves monetary policy decision this week...

Gross domestic product (GDP) in the 20 countries sharing the euro was flat in the fourth quarter against the previous three months, mainly thanks to strong growth in Spain and Portugal and a modest increase in Italy, while the German economy shrank in the final three months of 2023...

The euro was down 0.05% at $1.0827 against the dollar, as expectations are for a stronger U.S. outlook than in the euro zone, which has led investors to fully pricing in a rate cut by the European Central Bank (ECB) in April...

Markets are currently pricing in a 46.6% chance that the U.S. central bank will begin cutting in March, dropping from 73.4% a month ago, according to the CME Groups FedWatch Tool, as data has been reinforcing the view that the U.S. economy remains resilient...

With Japanese policy normalisation looking more likely in the second quarter, when the Bank of Japan (BOJ) will have additional wage data, the dollar-yen rate will be more driven by the Fed than any expectations of a policy shift by the BOJ in the short term, said Wei Liang Chang, currency and credit strategist at DBS...

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