Investing.com - The euro fell to six-week lows against the dollar on Wednesday, falling below the $1.05 level, pressured lower by a combination of fears over European political worries and expectations for higher U.S. interest rates.
EUR/USD hit lows of 1.0494, the weakest level since January 11 and was down 0.31% at 1.0503 at 10.40 GMT.
The single currency has come under heavy selling pressure amid fears over the possibility of a Brexit or Trump-style shock result in France’s upcoming presidential election.
Investors’ fears that a victory for far-right candidate Marine le Pen, who is the front runner to win the first round vote, could potentially trigger the country’s exit from the euro area.
The euro showed little reaction to data showing the annual rate of inflation in the euro area was confirmed at 1.8% in January.
Another report on Wednesday showed that German business confidence improved unexpectedly in February as the euro zone’s largest economy got back on track after a cautious start to the year.
The euro was sharply lower against the safe haven yen, with EUR/JPY down 0.99% at 118.63, the lowest level since November 29.
The single currency retraced some losses against the pound after data showing that while the UK posted its fastest rate of growth in a year in the fourth quarter, growth for the full year was revised lower.
EUR/GBP last at 0.8429, off 0.24% for the day after falling as low as 0.8403 earlier, the lowest level since December 21.
Demand for the dollar continued to be underpinned as investors awaited the minutes of this month’s Federal Reserve policy meeting, due to be published later Wednesday, for fresh signals on the expected pace of rate hikes.
The Fed last raised interest rates in December and has indicated that it could hike rates three times this year.
According to Investing.com's Fed Rate Monitor Tool around 22% of traders expect the Fed to raise interest rates at its next meeting in March. The chance of a May increase was seen at around 50%, while June odds were at 73%.
Philadelphia Fed President Patrick Harker said late on Tuesday he expects the Fed to raise interest rates three times this year.
The comments came after Cleveland Fed President Loretta Mester said Monday she would be “comfortable” raising interest rates as inflation pressures pick up.