The euro is trading Tuesday at its lowest level against the dollar since 2002 fas traders gauge the amount of hiking the ECB will be able to do.
The euro (NYSEARCA:FXE) is down 1.1% to $1.031 against the U.S. dollar (USDOLLAR) following disappointing French production data.
French industrial production was flat month over month in May, while economists were looking for a 0.2% rise.
Money markets cut the amount of ECB tightening priced in to below 140 basis points after the numbers, Bloomberg reported.
That put further pressure on the single currency, which has been up just one month against the greenback this year.
The "question of how the ECB will deal with a potential widening in spreads is set to come increasingly to the fore as they almost certainly embark on their first hiking cycle in over a decade this month," Deutsche Bank's Jim Reid wrote. "And yesterday we heard some further comments from ECB officials on that hiking cycle, with Estonia’s Muller pushing back against the calls from others to start with a 50bps hike, saying that it was appropriate to begin with a 25bps move in July, and then 50bps in September as they’ve signaled."
The ECB instructed staff last month to create a new tool to deal with fragmented yields.