The euro slipped 0.6% to $1.119 on Wednesday after touching a 17-month low of $1.1161 earlier in the week, pressured by oil prices near $100 a barrel and fiscal worries in France. Federal Reserve minutes showing division over last month's rate decision added to the uncertainty.
The euro slipped 0.6% to $1.119 on Wednesday, extending a retreat that had already pushed it to a 17-month low of $1.1161 earlier this week. The dollar index rose 0.37%, reversing a 0.27% slide from the prior session.
Oil and French fiscal risk weigh on the euro
Brent crude held near $100 a barrel after the International Energy Agency agreed to speed up a release of oil stocks and prioritize diesel, a move meant to curb record-high fuel prices as the Iran war squeezes global supplies. Brent futures settled down 38 cents, or 0.38%, at $100.20 a barrel.
French bonds have come under pressure as expectations of higher European Central Bank rates and political uncertainty ahead of the 2027 election raise doubts over France's ability to fix its finances. Wider yield spreads in the euro area weigh on the single currency by boosting expectations of ECB easing and reviving fears of fragmentation tied to the bloc's fiscal policy outlook.
Georgette Boele, senior currency and oil strategist at ABN AMRO, said the widening rate spread between Germany and the US supported the dollar against the euro. According to Boele: "too many rate increases by the Fed and the ECB" are being priced in by markets.
Fed minutes show division over rate hike
Minutes released Wednesday showed Federal Reserve policymakers were divided last month over the case for raising interest rates. Some participants saw a hike as needed to keep energy and other price shocks in check, but a more hawkish core viewed it as necessary to guard against emerging demand-driven inflation.
Russ Brownback, BlackRock's deputy chief investment officer of global fixed income, said the latest rate increase did not foretell a predetermined tightening cycle, describing the committee's stance as vigilance rather than a sustained tightening campaign.
US Treasuries rose Wednesday afternoon, with yields pulling back from highs as oil prices eased and a strong $39 billion auction of 10-year notes reassured investors that demand for long-term government debt remained intact. The yield on benchmark US 10-year notes was last at 5.284%.
Source: Investing.com
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