The euro traded lower against most of its major rivals today, though managed to gain on the Great Britain pound, which itself was very soft. The shared 19-nation currency was heading to end week either flat, losing earlier gains, or lower versus its most-traded peers.
Some market analysts attributed the euro’s weakness to the boost that the better-than-expected US Producer Price Index provided to the dollar. But the EUR/USD currency pair did not react to the release, so it is unlikely the case.
Another reason for the euro’s decline suggested by experts was the continuing clash over the Italian budget deficit plans between Italy and the European Union. Vice President of the European Commission Valdis Dombrovskis said that Italy’s projections are based on overly optimistic assumptions. Italian Economy Minister Giovanni Tria responded, saying that deficit cuts proposed by Brussels will be “suicide” for Italy’s economy.
The hawkish stance demonstrated by the Federal Reserve in yesterday’s policy statement was also weighing on the common currency of the eurozone. While the Fed did not change its policy this month, it anticipates more interest rate hikes in the future.
EUR/USD fell from 1.1363 to 1.1334 as of 19:27 GMT today, touching the low of 1.1316 intraday. EUR/JPY dropped from 129.60 to 128.91. At the same time, EUR/GBP managed to rally from 0.8698 to 0.8735.
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Euro Soft on Continuing Clash Over Italy’s Budget, Fed’s Hawkish Stance
