Euro Drops Amid Fed Tightening Concerns
07 April 2022 - 09:45AM
RTTF2
The euro fell against its major counterparts in the European
session on Thursday, as investors digested the U.S. Federal
Reserve's minutes that laid out plans to reduce the size of the
balance sheet and suggested aggressive interest rate hikes to
combat inflation.
The Fed minutes from the March meeting showed that most
policymakers supported one or more 50 basis point rate hikes at
future meetings, if inflation pressures remained elevated or
intensified.
Fed officials agreed that balance sheet runoff should start from
May. The plan involves reducing bond holdings by $95 billion per
month and the amounts could be phased in over a period of three
months or modestly longer if market conditions warrant.
The monetary policy divergence between the Fed and the European
Central Bank also undermined the euro.
Data from Eurostat showed that Eurozone retail sales grew less
than expected in February as the decline in food sales
deepened.
Retail sales rose 0.3 percent month-on-month in February,
slightly faster than the 0.2 percent increase in January. However,
sales were slower than the expected growth of 0.6 percent.
Data from Destatis showed that Germany industrial production
grew unexpectedly in February.
Industrial output grew 0.2 percent month-on-month in February,
confounding expectations for a fall of 0.2 percent. Nonetheless,
this was slower than the revised 1.4 percent increase posted in
January.
The euro dropped to more than a 4-week low of 1.0865 against the
greenback and a fresh 2-week low of 0.8314 against the pound, off
its prior highs of 1.0934 and 0.8351, respectively. The euro is
poised to challenge support around 1.06 against the greenback and
0.82 against the pound.
The euro was down against the yen, at a 2-day low of 134.42. The
euro is seen finding support around the 132.00 level.
Reversing from its early 3-day highs of 1.4602 against the
aussie, 1.3727 against the loonie and 1.5839 against the kiwi, the
euro edged down to 1.4529, 1.3650 and 1.5765, respectively. The
next possible support for the euro is seen around 1.44 against the
aussie, 1.35 against the loonie and 1.54 against the kiwi.
The euro eased off from a prior high of 1.0191 against the franc
and slipped to 1.0146. The euro may possibly challenge support near
the 1.00 level.
Looking ahead, U.S. weekly jobless claims for the week ended
April 2 and consumer credit for February will be featured in the
New York session.
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