Euro backs off nine-month high on profit-taking

Euro fell in European trade on Friday against dollar for a second session off nine-month highs on profit-taking.

Euro is heading for the third weekly profit in a row on prospects of a 0.5% rate hike by the ECB at both the February and March meetings. 

EUR/USD fell 0.25% to 1.0865, with a session-high at 1.0900, after falling 0.2% yesterday, the first loss in seven days on profit-taking away from nine-month highs at 1.0929. 

Dollar also rebounded from multi-month lows after positive US data, which bolstered the case for multiple more rate hikes. 

Euro is up 0.25% so far this week against dollar on track for the third weekly profit in a row. 

ECB

ECB President Christine Lagarde said recently that inflation remains too high and the bank is committed to continuously increase interest rates until inflation is brought back to 2%.

Lagarde once again repeated the use of the phrase "staying the course" when talking about interest rate decisions at upcoming meetings, meaning the current pace will be maintained at least until the second quarter of the year.

Other ECB members strongly hinted at multiple 0.5% rate hikes in both February and March.

The Dollar

The dollar index rose 0.2% on Friday for the second session off eight-month lows at 101.50 against a basket of major rivals. 

Recent data showed US economy grew in the fourth quarter more than expected, while unemployment claims hit nine-month lows. 

Estimates

Despite euro's current decline, analysts still expect euro to gain ground above $1.1 in the short term, as the ECB prepares to increase interest rates by double the Fed's rate in February.