Euro May Lose Ground On US Recovery
The euro declined slightly as the dollar strengthened after the Federal Reserve meeting minutes showed the US central bankers were all in agreement about tapering the bank's bond buying plan. The common currency traded at $1.3343 on Thursday morning after losing 0.1 percent to the dollar in the early hours.
Now, investors are waiting for manufacturing and services data from the eurozone that is likely to show improvement from last month's reading and add to the region's growing forward momentum. Bloomberg reported that Markit Economics has estimated that the eurozone's composite PMI, due out later today, will rise to 50.9 from 50.5 in July. The figure, above the 50 point benchmark that indicates growth, will likely add to the currency's strength.
However, the euro could lose some ground as positive data from the US is also expected this week. US new homes sales data is likely to come in near June's five year high of 497,000. Continuous claims for jobless benefits are likely to have fallen to 2.96 million for the week ending on August 10th. The positive data will have a buoyant effect on the greenback as investors continue to look for evidence that the Federal Reserve will taper its $85 billion per month stimulus spending in September.
The European Central Bank is also likely to intervene as the common currency strengthens. European Central Bank president Mario Draghi has been promising to keep interest rates at 0.5 percent, or even to lower the current rate, for as long as it takes to kick start the economy. With the euro's newfound strength, many are speculating that the bank will step in to bring down interest rates at their next policy meeting.
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