EUR/USD Declined Following Release of Fed Minutes

The EUR/USD depreciated on Wednesday, Feb. 18, after the Federal Reserve released the minutes of its January policy meeting. 

The currency pair fell to as little 1.1338 during the session, FXStreet reported at 17:01 Greenwich Mean Time. The media outlet provided some technical analysis of the EUR/USD, stating that the currency pair could experience a breakout at 1.1450, the previous day’s high, and encounter resistance at 1.1320, the low obtained Feb. 16.  

While the dollar had risen against the euro earlier in the session, it lost the majority of these gains after Fed minutes revealed government officials voiced concerns that raising benchmark interest rates could hinder the recovery, according to Reuters. In addition, the document showed that voting members of the FOMC worried over whether they should include “patient” in their interest rate guidance. 

“These minutes seem to suggest that the Fed was in no hurry whatsoever to begin hiking,” Steven Englander, global head of G10 FX strategy at CitiFX in New York, told the news source. 

The outcome of these latest minutes seems to contrast with the expectations many have that the central bank will hike its interest rates in 2015. While such a move is still a possibility, the latest minutes clearly provided no new evidence to support the idea that these benchmark borrowing costs will experience a jump this year. 

Impact of Greek developments

Another factor that placed some downward pressure on the common currency and prevented it from rising sharply when compared to the greenback was hope that Greece will come to some sort of debt agreement with its creditors, according to Reuters. 

“There’s a strong presumption now that Greece and the Eurogroup will find some language which essentially extends the program,” Englander stated in reference to the bailout program, the media outlet reported. 

Earlier this week, rumors circulated that the Greek government would request an extension from the region. 

Emergency credit facility

On Wednesday, MarketWatch reported that the European Central Bank had approved a request made by Greece’s central bank for 68.3 billion euros to be lent to the troubled nation’s lending institutions through an emergency credit facility, according to an individual with knowledge of the situation. 

As a result of this decision, Greek banks can harness the ECB’s program, known as Emergency Liquidity Assistance, for the next two weeks, according to the news source. If these lending institutions require additional assistance, it is the responsibility of Greece’s central bank to articulate this need to the governing council of the ECB. 

This change might help alleviate the tension that has existed since the Greek elections in January. Radical party Syriza ran on an anti-austerity platform, and managed to install a new prime minister holding these views after capturing nearly half the seats in the nation’s parliament. 

Since then, Alexis Tsipras, the new head of state, has been making bold statements about Greece’s future and provoking concerns the country may have to exit the eurozone. While the latest concession of the ECB might represent progress, market participants interested in forex trading might benefit from keeping in mind that the situation could deteriorate at any time. 

By being prepared for this volatility, investors can be far better prepared to weather the storm associated with any currency fluctuations.