The euro plummeted versus the US dollar on Wednesday following the Federal Reserve’s statement; the possibility of the Fed tapering their stimulus package in the next few months drove dealers to dump the euro and buy the US dollar. The euro continued to drift lower versus the US dollar yesterday, as stronger-than-expected homes sales and manufacturing figures from the US pushed the euro further into the red.
The Federal Reserve’s monetary policy has been extremely loose over the past few years. Interest rates have been ultra-low and $85 billion a month is being pumped into the financial system. This has kept the US dollar relatively weak in recent years. Traders will be keeping an eye on US economic announcements, and if the US continues to report positive economic indicators we could see the euro slide versus the US dollar as it may encourage the Fed to taper its policy.
We are not expecting any economic announcements from the US today, so it is possible we could see the euro climb higher versus the US dollar as traders close out their short positions.