Euro headed back towards parity

The Euro continues to fall against the US dollar in today’s trading session, once again heading towards parity after a hawkish stance by the US Federal Reserve in yesterday’s minutes meeting.

While not giving a concrete answer at a particular pace of coming rate increases, beginning with the Sept. 20-21 meeting, the minutes released on Wednesday showed U.S. central bank policymakers committed to raising rates as high as necessary to bring down inflation - even as they began to acknowledge the risk they run that they might go too far and slow down the economy.

The Fed has lifted its benchmark overnight interest rate by 225 points this year to a target range of 2.25 percent to 2.50 percent. The central bank is widely expected to hike rates next month by either 50 or 75 basis points.

This is going to leave the Euro languishing as the year unfolds according to analysts from Commerzbank who expect the European currency to remain under serious pressure as the European Central Bank (ECB) is lags behind the Federal Reserve when it comes to raising interest rates

“Discussions about whether the ECB will raise its key rate by 25 or 50 basis points in September only underscore how clearly the ECB is lagging behind the Fed but also the BoE. And this is becoming more of a problem for the euro as the growth outlook becomes increasingly gloomy” they said.

“The headwinds for the eurozone economy will increase into the winter. In particular, a continuing threat of gas shortages, and high energy prices are weighing on the growth outlook. This is weighing on demand and is also likely to dampen price pressure. The ECB is in danger of falling further behind other central banks. For the time being, this does not bode well for the euro.” They added.

To close out the trading week, there is no more further economic new for today so the sell off in the Euro may slow to a trickle as traders brace themselves for next week when a raft of economic news will hit the market including the famous meeting from Jackson hole