The euro has significantly weakened against the US dollar during today’s session following yesterday’s interest rate hike by the Fed. The euro also started the day by gaining ground against the Japanese Yen and the pound sterling as it hit major highs and lows before settling to trade at moderate price levels.
The EUR/USD pair has largely been affected by divergent monetary policies from the European Central Bank and the US Federal Reserve. This is best exemplified by the ECB’s announcement last week that it would extend its quantitative easing program. Contrary to the ECB announcement, the Fed raised interest rates in its policy statement released yesterday. The currency pair is likely to be buffeted by the divergent monetary policies emanating from the European block and the US into the next year.
Although the euro initially gained ground against the Japanese Yen by hitting a 6-month high, and the pound sterling, it has since retreated to levels lower than the day’s highs. However, the currency markets are currently being dominated by the US dollar.
The EUR/JPY currency pair hit a 6-month high of 124.10 during today’s session, although it retreated to trade at 123.06 as at 21:05 GMT. The EUR/GBP was trading at a high of 0.8404 earlier in the day but it retreated to trade at 0.8384 as at 21:09 GMT. The EUR/USD tested a 14-year low of 1.0365, which was last witnessed in January 2003, but went on to trade at 1.0416 as at 21:11 GMT.
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