Euro hits two-week lows on diverging ECB, Fed policy outlook

Euro hits two-week lows on diverging ECB, Fed policy outlook

22 September 2015, 10:54
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On Tuesday the euro slid to two-week lows against the firmer dollar after comments by some Federal Reserve officials overnight signaled that a U.S. rate hike is still on the cards this year.

EUR/USD dropped 0.17% to 1.1172 - the lowest level since September 9, before recovering to 1.1183.

In separate comments, St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart indicated that the U.S. central bank is still likely to raise short-term interest rates this year. The greenback was given a boost after the remarks.

Investors were now awaiting a speech by Fed Chair Janet Yellen later in the week for additional clarity on the bank’s decision last week to leave interest rates on hold.

The shared currency remained on the back foot amid concerns that the European Central Bank could expand its trillion-euro monetary stimulus program after it cut its forecasts for growth and inflation earlier this month.

Mario Draghi, the head of the European Central Bank is expected to address lawmakers at a European Parliament hearing in Brussels on Wednesday.

Over the weekend, ECB Chief Economist Peter Praet reiterated that the bank could expand monetary stimulus if necessary to combat risks from global economic turbulence.

Investors were looking ahead to Chinese manufacturing data on Wednesday, as well as surveys of the euro zone private sector for fresh indications on the condition of the global economy.

The euro was also at two-week lows against the yen, with EUR/JPY down to 134.01.

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