Euro Makes Modest Gains After Selloff

The euro stabilized on Wednesday morning after a selloff took it down near $1.28 on Tuesday.

The currency traded at $1.2932 at 10:15 GMT as many worried about the state of the region’s economy.

Reuters reported that most investors are expecting to see the euro fall further in the weeks to come as the effects of a sanctions war with Russia become more prominent in economic data.

Sky high unemployment coupled with dangerously low inflation have also been weighing on the common currency, causing it to post weekly declines for the majority of the summer.

Related Link: Agribusiness ETFs Fight Summer Malaise

Meanwhile, the dollar headed in the opposite direction as speculation that the Federal Reserve could raise interest rates sooner than expected grew following a study from the San Francisco Fed. The research showed that markets’ predictions for the central bank’s rate increase may be too cautious, and that the bank could raise rates as early as next year.

Data from the U.S. has pointed to a continuing recovery, but the bank has been reluctant to commit to a firm timeline for a rate hike. Fed Chair Janet Yellen has said she is still worried about the labor market as recent data hasn’t been strong enough to indicate that it can stand on its own.

Moving forward, investors will likely keep an eye on the progressing situation in Ukraine where peace negotiations continue between Ukraine, the separatist groups and Russia to put a stop to the fighting.

Although the U.S. and the EU have prepared a new round of sanctions against Russia, they are holding off in hopes that the negotiations will result in a lasting peace agreement.