Investing.com -- EUR/USD fell sharply on Wednesday, plunging to its lowest closing level in more than two weeks, as a wave of strong economic data eased fears of a global slowdown propping up the slumping dollar against its main rivals.
The currency pair traded in a broad range between 1.1268 and 1.1391, before settling at 1.1277 down 0.0096 or 0.93% on the day. With the sharp decline, the euro closed under 1.13 against the dollar for the first time in nearly a dozen sessions. The dollar has come under intense pressure in recent weeks amid strong indications from the Federal Reserve that it will delay the timing of its first interest rate hike of 2016.
Despite Wednesday's rally, the dollar is still down more than 1.5% against its European counterpart since the Federal Open Market Committee (FOMC) lowered its interest rate forecast last month at a closely-watched meeting. The U.S. central bank now expects to raise short-term interest rates no more than twice this year, down from previous expectations for as much as four rate hikes in December's outlook.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.
The dollar bounced from near-eight month lows on Wednesday after the Chinese government reported on Wednesday that exports surged by 11.5% in March on an annual basis, defying expectations for slight gains of 2.5%. The upbeat data bolstered investor confidence, one month after Chinese exports plummeted more than 25% in dollar terms. In renminbi terms, Chinese exports soared nearly 19% on the month while imports fell mildly in March.
Further upward moves in the greenback were limited from soft producer price and retail sales data last month. In March, the U.S. Bureau of Labor Statistics' PPI-FD index fell by 0.1%, extending mild losses from the previous month in spite of continued increases in oil prices. Analysts expected consensus gains of 0.3%. Meanwhile, retail sales last month fell 0.3%, amid sharp declines in auto sales. While gasoline sales surged 0.9% as prices spiked to their highest level in two months, overall sales minus gasoline fell 0.4% in March, underscoring the impact of higher prices at the pump.
The gains in the dollar could be ephemeral until the FOMC issues its next interest rate decision on April 27. On Tuesday, Federal Reserve Bank of Dallas president Rob Kaplan said he thinks the FOMC could raise short-term interest rates in June if the economy demonstrates continued improvement, while San Francisco Fed president John Williams said the Fed should approve "two to three rate hikes," before the end of the year if the current economic outlook remains unchanged. On Thursday, Fed governor Jerome Powell and Atlanta Fed president Dennis Lockhart are scheduled to make public appearances, while Chicago Fed president Charles Evans is scheduled to deliver a speech at a JP Morgan Investor Seminar in Washington on Friday.
Last month, Fed chair Janet Yellen said the FOMC will express extreme caution in raising interest rates as headwinds from heightened global financial risks continue to recede slowly. The FOMC has left its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50% at each of its first two meetings this year.
Yields on the U.S. 10-Year fell one basis point to 1.76%, while yields on the Germany 10-Year lost four basis points to 0.13%. Government bond yields on U.S. 10-year Treasuries, as well as German 10-year bunds have both plunged at least 14 basis points over the last month.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.80% on Wednesday to an intraday high of 94.85 before settling near session-highs at 94.81. On Monday, the index dipped below 94 to hit an eight-month low.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as investors pile into the greenback in an effort to capitalize on higher yields.