The euro fell to a two-month low against the dollar Wednesday as weak economic data boosted expectations that the European Central Bank could implement aggressive monetary easing as early as this week.
The dollar did not change much against a basket of currencies after three consecutive days of gains, trading in a narrow range ahead of the European Central Bank (ECB) and the Federal Reserve (FED) monetary policy meeting next week.
Wednesday's data were generally weaker than expected, with manufacturing activity slowing to a nearly 10-year low in early July. New home sales rebounded in June in the United States, but the sales figures for the first three months were revised down.
Yasemin Engin, an assistant Macro Analyst at Kaishou, said the U.S. manufacturing data "supports the widely anticipated Fed rate cut next week, although some recent hard data are relatively strong".
In the euro area, the money market predicts a 54% chance that the ECB will cut interest rates by 10 basis points at its meeting on Thursday.
The purchasing managers'index (PMI) in the eurozone unexpectedly dropped from 52.2 in June to 51.5 in July, a three-month low, and the possibility of a 10-basis-point interest rate cut has risen since the data were released. Economists polled by Reuters had expected the index to slip to 52.1.
50 is the watershed between economic growth and contraction.
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