Euro drifts lower on profit taking

The euro is down 0.4% versus the US dollar this morning, as traders lock in their profits from recent gains.

The euro has risen against the US dollar for a third week in a row, and dealers have used this as an excuse to take some of their money off the table and close out their long positions. The financial markets do not move in straight lines, so even though the euro is in a clear uptrend it is not uncommon to see a small correction like today’s move.

In the past month, focus has very much been on the Federal Reserve. Its current monetary policy is very loose, interest rates are ultra-low, and each month it is pumping $85 billion into the financial system. There has also been speculation that the Fed will taper the size of its quantitative easing programme.

The most recent update has been in terms of the US unemployment rate, which shows an increase to 7.6%; this makes it doubtful that the Fed will change its monetary policy any time soon. This may lead to continued euro strength versus the US dollar.

Spot FX EUR/USD chart

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