Euro Sinks Below $1.23 To Finish The Week

The euro looked likely to finish the week on a low note as the common currency struggled under the weight of a deteriorating economy. The common currency traded at $1.2287 at 6:30 GMT as the dollar rallied due to optimism about the US economy.

On Wednesday, the US Federal Reserve released an encouraging economic outlook, but vowed to remain patient with raising interest rates. Following the meeting, Fed Chair Janet Yellen hinted that April 2015 would be the earliest the bank would increase interest rates, causing the dollar to jump. Though Yellen did not confirm the date of a rate hike, she said rates would remain low for the next “couple of meetings” which investors have interpreted to mean that the bank’s third meeting in 2015 will result in a rate increase.

Meanwhile, the eurozone was moving in the opposite direction as deflation fears and struggling economies pulled the region’s currency downward. However, the euro’s falling value had a silver lining for eurozone businesses, as it makes them more competitive against their peers. On Thursday, the Wall Street Journal reported that Germany’s business confidence survey showed that the nation’s firms were becoming  more bullish due to the weaker euro.

Another contributing factor to the improved sentiment was falling oil prices, which has relieved some of the financial pressure facing German firms. The nation’s Ifo business confidence indicator increased to 105.5 in December, up from 104.7 in November. The figure added to growing speculation that Germany’s GDP growth in the fourth quarter was muted, but that the nation will likely pick up come 2015.