Euro on track for third weekly loss in row

Euro rose in European trade on Friday for the first time in four sessions against dollar amid attempts to recover from two-month lows, while on track for the third weekly loss in row on concerns about a widening policy gap between the US and Europe. 

Recent bullish remarks by Fed officials bolstered the case for a 0.25% rate hike in June, in addition to a spate of solid US data. 

EUR/USD rose 0.2% to 1.0743, with a session-low at 1.0717, after losing 0.2% on Thursday, the third loss in a row, hitting two-month lows at 1.0707 following strong US data.

Euro is down 0.6% so far this week on track for the third weekly loss in a row, the longest such streak of weekly losses this year.

European Rates

Despite assertions from the European Central Banks on extended policy tightening, doubts are mounting on whether the ECB will raise interest rates further this year.

The ECB remains one of the slowest major central banks in raising interest rates, placing sixth in the G8 major currency regions.

Now investors await crucial European inflation data next week to better gauge the path ahead for policies in Europe.

The Dollar

The dollar index fell 0.2% on Friday, the first such decline in five sessions away from two-month highs at 104.31 on active profit-taking.

Most remarks by Fed officials were highly bullish, showing that the battle with inflation in the US is still ongoing.

Recent strong US GDP growth data in the first quarter and unemployment claims also boosted the chances of a Fed rate hike in June.

Markets are pricing in a 40% chance of a 0.25% Fed interest rate hike in June, up from 31%.

Policy Gap

The ongoing interest rate gap between the US and Europe is standing at 150 basis points, and it might grow even further next month.