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Euro drops below $1.04, set to test January 2003 lows

ForexDec 28, 2016 08:06AM ET
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© Reuters. Euro drops below $1.04

Investing.com - The euro was under pressure against the broadly stronger U.S. dollar amid thinning pre-New Year holiday trade on Wednesday, with the single currency looking set to test the lows from January 2003.

The euro fell to a session low of 1.0393 against the greenback, not far from last week's 13-year trough of 1.0352. The pair was last at 1.0397 by 8:05AM ET (13:05GMT), down 0.55% on the day.

Trading volumes are expected to remain light this week due to the holiday period as many investors already closed books before the end of the year, reducing liquidity in the market, which could exaggerate market moves.

The greenback remained well-supported after previous day's data showed U.S. consumer confidence hitting its highest level in more than 15 years in December, in addition to robust housing numbers.

The upbeat reports helped underscore expectations that the Federal Reserve would raise interest rates at a faster pace next year.

Since the U.S. election in early November, the dollar has rallied by almost 6% thanks to bets of higher U.S. growth and a faster pace of interest rate increases under incoming president Donald Trump.

The Fed hiked interest rates for the first time in a year earlier this month and projected three more increases in 2017. In contrast, the European Central Bank remains committed to very loose monetary policies

Higher rates boost the dollar by making the currency more attractive to yield-seeking investors.

The National Association of Realtors is to release data on November pending home sales at 10:00AM ET (15:00GMT) on Wednesday. The report is expected to show pending home sales rose 0.5% last month, after inching up 0.1% in October.

Euro drops below $1.04, set to test January 2003 lows
 

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