Dollar dives vs euro in sudden move, hits lowest level since 2015

The dollar dropped 0.77 percent against the euro on Wednesday, hitting its lowest level against the common currency in more than two-and-a-half years.

The euro traded at $1.1876 against the greenback as of 2:06 p.m. in New York. The euro also broke above $1.19 for the first time since Jan. 6, 2015.

The dollar index, which tracks the U.S. currency’s performance against the euro and five other currencies, fell 0.38 percent to 92.69, and hit its lowest level since May 3, 2016.

“I think this is a combination of negative news out of the U.S. and more positive news out of Europe,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “There are lower expectations for tighter monetary policy out of the Federal Reserve and higher expectations for more tightening out of the European Central Bank.”

The Fed has signaled it expects to raise interest rates once more this year, as well as start unwinding its massive $4.5 trillion portfolio. The central bank amassed its gargantuan balance sheet as it tried to stimulate the U.S. economy after the Financial Crisis.

But investors have been betting the Fed will not be able to tighten as much as it expects given persistently low inflation figures. Meanwhile, in Europe, the economy continues to run hot, opening the door for ECB President Mario Draghi to start tightening monetary policy on his end.

The dollar’s move lower also follows remarks made by President Donald Trump about his preference for a weaker dollar.

“I like a dollar that’s not too strong,” Trump said last week, according to the transcript of an interview between him and the Wall Street Journal, which was released Tuesday. “I mean, I’ve seen strong dollars. And frankly, other than the fact that it sounds good, lots of bad things happen with a strong dollar.”

Unlike Trump, most presidents have avoided commenting on the U.S. dollar. Trump, however, has been vocal about his desire for a weaker currency.