Euro Slips Against US Dollar as Draghi Supports Monetary Stimulus

The euro is set to continue its strike of losses against the US dollar on Friday, which would mark its 10th day of declines. The shared currency lost all its momentum against the greenback as Donald Trump’s win in the presidential election was followed by a stream of positive data in the USA, at a time when the Eurozone economy remained relatively fragile.

The euro lost more support today as European Central Bank President Mario Draghi said that the economic recovery in the Eurozone is still dependent on stimulus measures from the central bank. He also stressed that policymakers need to stay alert to the economic needs of the region, hinting that the central bank’s stimulus program might be extended soon. The ECB will meet on December 8 to decide the future of its monetary stimulus, which often puts added pressure on the euro’s value when it is raised.

So even if there are many encouraging trends in the euro area economy, the recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support. The ECB will continue to act, as warranted, by using all the instruments available within our mandate to secure a sustained convergence of inflation towards a level below, but close to 2pc

Meanwhile, the US Federal Reserve is expected to move towards higher interest rates next month. Federal Reserve Chair Janet Yellen told Congress on Thursday that she believes a rate increase will happen relatively soon. Futures prices show that investors are very certain that a decision to raise rates will be taken when the Federal Open Market Committee meets on December 14.

The shared currency is set to be negatively affected by possible new political hurdles in Europe. A constitutional referendum in Italy on December 4 will shape the future of fiscal reforms that Italian Prime Minister Matteo Renzi is trying to pass. The referendum’s result might force Renzi to dissolve his government or even resign.

EUR/USD traded at 1.0601 as of 15:07 GMT, after touching 1.0584 at 05:55 GMT, the pair’s lowest level since December 2015. EUR/USD opened trading today at 1.0625, but failed to go higher than 1.0642, which it touched at 12:52 GMT.

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