Euro Depressed Under Dollar's Strength

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The euro fell to a new low on Wednesday as the dollar strengthened on speculation that the US economy performed well in the second quarter. The common currency traded at $1.3407 at 6:45 GMT as investors also awaited the conclusion of the US Federal Reserve’s policy meeting.

Recent data from the US has shown that the job market is picking up while inflation is stabilizing. With that in mind, investors are speculating that the Fed could revise the wording in its policy statement to reflect the possibility of a sooner than expected interest rate hike. Fed chair Janet Yellen has said that the bank would consider raising rates early if the labor market improved faster than forecast. 

Also due out on Wednesday is second quarter GDP data for the US, which is expected to show a marked improvement from the nation’s first quarter decline. Reuters reported that analysts are expecting the US economy to have grown 3.2 percent from April to June. Second quarter GDP will be a huge indicator as to whether or not the nation’s 2.9 percent contraction in the first quarter was truly a fluke caused by poor weather.

The euro has been drowning under the dollar’s strength recently, and geopolitical tension between the West and Russia has also helped depress the common currency. The EU responded to Russia’s continued involvement in the Ukrainian conflict by implementing tougher sanctions which target the nation’s finance, energy and defense sectors. The stricter sanctions will likely deliver a blow to the eurozone’s economy as well since Russia is a major trading partner for many EU nations.

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Posted In: NewsEurozoneCommoditiesForexGlobalFederal ReserveMarketsFederal Reserve
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