Investing.com -- EUR/USD fell mildly on Wednesday extending losses from the previous three sessions, amid hawkish signals from the Federal Reserve that it could accelerate the pace of its first tightening cycle in the last decade over the coming months.
The currency pair traded in a broad range between 1.1159 and 1.1221, before settling at 1.1179, down 0.0042 or 0.37%. Following its fourth consecutive losing session, the euro closed under 1.12 versus the dollar for the first time in nearly a week. Last week, the euro soared to five-month highs against its American counterpart after the Fed left interest rates unchanged and lowered its outlook for future rate hikes.
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.
Since the Federal Open Market Committee (FOMC) unexpectedly downgraded its rate outlook at last week's two-day March meeting, a number of key policymakers have reversed course in recent days by striking an aggressively hawkish tone. Addressing an audience of bond traders on Tuesday night at the Money Marketeers of New York University's conference on Growth and the Role of Economic Policies, Federal Reserve Bank of Philadelphia president Patrick Harker Patrick Harker squarely aligned himself with his hawkish colleagues on the Federal Open Market Committee (FOMC). Citing continued improvement in the economy, Harker said the Fed should consider raising interest rates as early as its next meeting on April 28-29 and that he prefers at least three rate hikes before year's end. Harker, who became president of the Philadelphia Fed in mid-2015, is a non-voting member of the FOMC until the start of next year.
"I think we need to get on with it," Harker said. "I am not a two (rate) rise person. This economy is really quite resilient to a lot of the headwinds so if that continues I would be supportive of another 25 basis point rise."
Separately, Chicago Fed president Charles Evans said Tuesday that he expects two more rate hikes from the Fed this year. The FOMC's benchmark Federal Funds Rate continues to hover around 0.37%, after the U.S. central bank opted to leave its targeted range unchanged last week between 0.25 and 0.50%. The Fed has held short-term interest rates steady at each of its last two meetings since it ended a seven-year zero interest rate policy (ZIRP) in December. Even with three rate hikes over the next nine months, Harker still believes monetary policy would be "incredibly accommodative" around 1%.
Harker's statements followed comparable hawkish comments from San Francisco Fed president John Williams and Atlanta Fed president Dennis Lockhart earlier this week. In recent months, dovish members of the Fed have argued that rates should continue to remain relatively low, as slowing economic conditions in China spill over into the global economy. Meanwhile, St. Louis Fed president James Bullard will deliver a speech on Thursday in New York, days after suggesting the Fed should study whether persistently lower interest rates could pin down long-term inflation.
Elsewhere, investors continued to monitor geopolitical developments following Tuesday's twin terror attack in Belgium, which killed 31 people and wounded approximately 270 others. In Europe, the major indices were relatively flat while the STOXX Europe 600 Travel & Leisure index closed down by 1.8%.
Yields on the U.S. 10-Year fell six basis points to 1.88%, while yields on the Germany 10-Year lost one basis point to 0.20%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.55% to an intraday high of 96.24 in U.S. afternoon trading before settling at 96.06. Although the index rose to near one-week highs, it is still down by more than 1% over the last month.