Market Overview

Euro Under Pressure As Fed Meeting Approaches

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The euro began the week under pressure as the US Federal Reserve’s policy meeting approached.

The common currency traded at $1.3547 at 6:00 GMT on Monday morning as investors speculated about whether or not the Fed would provide any updates on its plans to raise interest rates.

The Fed is set to hold its monthly policy meeting on Tuesday and Wednesday this week. The bank is expected to continue tapering its monthly asset purchases by $10 billion and maintain its low interest rate.

Investors will be closely watching Fed Chair Janet Yellen for hints about the timing of an interest rate hike in the future. The bank could also revise its economic view to reflect recent economic indicators.

Meanwhile, eurozone policy makers are struggling with the region’s patchy recovery, saying that a strong euro is making it difficult to compete in the global marketplace. 

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Several eurozone states have called for the European Central Bank to use monetary policy in order to weaken the common currency, but the bank has been adamant in saying that the exchange rate is not a policy aim.

However, bank President Mario Draghi admitted last month that the currency’s strength would factor into the bank’s decisions as it was seen as keeping inflation high.

On Sunday, Reuters reported that the head of Bundesbank, Jens Weidmann, fired back at calls for devaluation, saying that any move to weaken the currency could initiate a “race” for central banks to weaken their currencies.

Following the ECB’s decision to ease further in June, Weidmann was openly opposed to the bank’s decision to buy government bonds and said had only agreed to it because it was justifiable given the region’s high inflation figures. 

Posted-In: European Central BankNews Eurozone Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga

 

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