Euro Slides Farther As Central Bank Policies Diverge

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The euro lost even more ground on Thursday after the U.S. Federal Reserve suggested that it was planning to raise interest rates sooner than expected on Wednesday.

The common currency traded at $1.3268 at 8:00 GMT on Thursday morning, as investors saw the European Central Bank’s monetary policy diverging further and further from that of the Fed.

Rate Hike Coming

On Wednesday, the U.S. Federal Reserve suggested that the strong comeback in the American labor market could lead to a sooner than expected rate increase. Reuters reported that minutes from the Fed’s July meeting showed that U.S. central bankers were on the fence about a rate increase, with most opting to hold off until economic data warranted the hike.

Related Link: Euro Remains Under Pressure

The minutes revealed that several central bankers agreed that the U.S. job market has been improving faster than expected. Most are expecting the bank to maintain the current interest rates until the beginning of 2015 as the Fed slowly tapers its asset purchasing program. However, once the purchases have ended, it is unclear how long the bank will wait to raise its main interest rate.

Euro Under Pressure

Meanwhile, the eurozone is still enduring a sluggish economic recovery as sanctions against Russia continue to weigh on the bloc’s forward progress.

On Wednesday, French President Francois Hollande voiced his concerns about the strength of the euro, saying that the common currency is still overvalued. Recently, the French economy has been struggling with record high unemployment figures and low industrial output and housing starts. According to Hollande, the strong euro is keeping the region from being competitive in the global market and thus further stifling the bloc’s already fragile recovery.

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