EUR/USD Exchange Falls As Monetary Policies Diverge
After dropping sharply during the first week of the month from around 1.3150, the EUR/USD fell lower at the beginning of last week hitting 1.2890 before rising slightly to close at 1.2965. The Euro has been falling against the Dollar due to expectations that European and US monetary policies will diverge.
The European Central Bank recently cut interest rates and announced plans to purchase asset backed securities in order to give support to the economy. The Federal Reserve on the other hand is expected to close its bond-buying program in the coming weeks and start increasing interest rates next year.
This week the Federal Reserve is due to meet to review monetary policy. An announcement on interest rate rises could result in the Euro falling further; however, it is more likely that the current levels will be maintained.