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Euro Slides as Weak Economic Data Sparks Concerns of Eurozone Recession

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The dollar strengthened on Tuesday after briefly hitting a one-month low due to a drop in U.S. bond yields. Weak economic data caused the euro to slide, with survey results showing a downturn in eurozone business activity. This suggests that the region may be at risk of slipping into a recession.

German data was particularly concerning, as the purchasing managers’ index survey revealed contraction in both the service sector and manufacturing sector. This decline in the euro contributed to the rise in the dollar index, which measures the U.S. currency against its major counterparts.

Jane Foley, head of FX strategy at Rabobank, explained that the strength of the United States economy compared to the eurozone and Germany is likely to limit any further falls in the dollar. Foley highlighted various factors impacting Germany’s production sector, such as a slowdown in China, higher energy costs, and demographic issues.

The recent surge in U.S. bond yields has had a significant impact on global financial markets. On Monday, the 10-year Treasury yield reached its highest level since July 2007, pushing the dollar index to nearly a one-year high. However, yields dropped sharply later in the day. Analysts suggest that a social media message from prominent hedge fund investor Bill Ackman, stating that he had closed out his bet against longer-dated bonds, contributed to the decline.

The dollar also experienced some fluctuations against the Japanese yen. It was last up less than 0.1 percent at 149.83 yen, approaching the 150 mark that often makes traders nervous about potential government intervention to support the Japanese currency.

Investors will closely monitor upcoming economic data, including U.S. gross domestic product figures and inflation data, which could lead to further swings in bond yields and currency markets. The yen, in particular, is expected to be sensitive to positive U.S. data, especially if it causes Treasury yields to surpass the key resistance level of 5 percent.

In addition to the dollar, the Swiss franc experienced some movement. The dollar was up 0.29 percent against the franc at 0.8935 francs. The Swiss currency, often viewed as a safe-haven asset, has recently gained strength due to the conflict between Israel and Hamas.

Meanwhile, the British pound was down 0.3 percent at $1.2212. Data released on Tuesday indicated that the UK labor market slowed slightly in the three months leading up to August.

Looking ahead, the Bank of England is scheduled to announce interest rates next Thursday, following the Federal Reserve’s decision on Wednesday. Traders anticipate that all three central banks—the Federal Reserve, Bank of England, and the European Central Bank—will maintain their current interest rates.

In cryptocurrency markets, bitcoin continued to rise during Asian trading hours, reaching $35,198, its highest level since May 2022. This surge is attributed to speculation surrounding the potential launch of an exchange-traded bitcoin fund.

More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )

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