The euro lost momentum against the dollar on Wednesday as the greenback took center stage after Fed minutes that showed the US central bank’s determination to raise rates quickly to fight inflation. Around 6:00 p.m. GMT, the euro fell 0.64% to 1.0667 dollars per euro, moving away from its peak in one month reached the day before at 1.0749 dollars.
“The dollar has rallied as the focus shifts to the Federal Reserve,” said Western Union’s Joe Manimbo. The Fed released the minutes of its last monetary meeting in early May where central bank officials said they were determined to bring inflation down sharply. Most of them felt that several further rate hikes of half a point will be “probably necessary”.
On May 4, the Fed raised its key rate by 50 basis points (0.50%) for the first time in twenty years. The European currency for its part was already down earlier in the session while the European Central Bank (ECB) underlined the “challenge” represented by the increases in interest that it is preparing for the coming months.
“Rising interest rates could present challenges for highly indebted companies and governments,” the ECB said in its semi-annual report on financial stability. And a member of the institution’s board, Fabio Panetta, further asserted that normalization would be “gradual”. Enough to make the single currency lose momentum, after marked gains since Monday and the assertion by the ECB that the end of negative rates was on the horizon.
