EUR/USD Trades Higher as US Dollar Weakens Despite Fed’s Hawkish Outlook

The EUR/USD currency pair rallied higher today solidifying the gains made yesterday as the US dollar weakened based on weak housing starts data released by the Census Bureau today. The US dollar weakened against the euro despite the hawkish outlook reported by Fed chair, Janet Yellen, during her two-day Humphrey-Hawkins testimony before Congress.

The currency pair had gained over 50 points during today’s session and had extended its rally from yesterday by over 100 points. The US dollar index, which tracks the greenback’s performance, was trading at 100.61, a decline from its opening price of 101.05.

The currency pair recovered from a drop triggered by Janet Yellen’s testimony where she spoke in favor of Fed rate hike and hinted at a hawkish outlook. The weaker US dollar is a result of negative market sentiment towards the US dollar as investors become more risk averse preferring to back safe currencies such as the Japanese yen.

The US dollar was also weakened by the lower-than expected figures for January housing starts reported today. Housing starts for January fell by 2.6%, a decline solely attributed to the multifamily sector as single-family housing starts rose by 1.9%.

Investors are watching the G20 meeting of foreign affairs ministers in Bonn, Germany, as it may yield resolutions that push either the euro, or the US dollar, higher, or lower.

The EUR/USD currency pair was trading at 1.0658 as at 17:18 GMT having opened the day’s session trading at 1.0601. The USD/JPY was trading at 113.41 having having opened the day trading at a high of 114.16.

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