Investing.com - The U.S. dollar rallied to fresh 12-year highs against the euro on Friday as the diverging monetary policy stance between the Federal Reserve and the European Central Bank pressured the single currency lower.
EUR/USD hit lows of 1.0462, the weakest since January 9, 2003 before pulling back to 1.0496 in late trade, still down 1.31% for the day.
The single currency had already weakened broadly this year after the ECB unveiled a trillion-euro quantitative easing program in January. The euro turned sharply lower after the bank started asset purchases on Monday, pushing euro area bond yields to new lows.
Lower bond yields make the single currency less attractive to investors at a time when expectations are mounting that the Federal Reserve could start rising interest rates mid-year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, advanced 1.22% to 100.32 late Friday, a level last reached in April 2003.
USD/JPY was at 121.38 late Friday, within striking distance of Tuesday’s eight year highs of 121.40.
The Bank of Japan expanded it stimulus program in late October amid concerns that falling oil prices could lower the inflation outlook.
Elsewhere, the pound fell to almost five-year lows against the dollar on Friday after Bank of England Governor Mark Carney indicated that interest rates could remain on hold beyond the start of next year.
GBP/USD hit a trough of 1.4700, the weakest since June 22, 2010 and was last at 1.4746, down 0.91% for the day. Sterling was higher against the euro, with EUR/GBP at 0.7116, holding above the seven-year low of 0.7013 set on Wednesday.
Elsewhere, the euro fell to a 20-month low against the yen, with EUR/JPY hitting lows of 126.91 before easing back to 127.36 at the close.
In the week ahead, investors will be focusing their attention on Wednesday’s Federal Reserve policy statement to see if it would drop its reference to being patient before raising rates. Central bank meetings in Japan and Switzerland will also be in focus.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, March 16
Switzerland is to release data on producer prices and retail sales.
In the euro zone, Germanys Bundesbank is to publish its monthly report.
Later Monday Canada is to publish data on foreign securities purchases.
The U.S. is to produce reports on industrial production and manufacturing activity in the New York region, as well as private sector data on the housing market.
Tuesday, March 17
The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, giving investors insight into how officials view the economy and their policy options.
The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.
In the euro zone, the ZEW Institute is to report on German economic sentiment. The euro area is also to release revised data on consumer inflation.
Canada is to publish a report on manufacturing sales.
The U.S. is to report on building permits and housing starts.
Wednesday, March 18
Japan is to publish data on the trade balance.
The U.K. is to publish its latest employment report, which includes a look at the unemployment rate, the change in the number of people employed and average earnings.
At the same time, the Bank of England is to publish the minutes of its February meeting.
Canada is to publish data on wholesale sales.
The Fed is to announce its federal funds rate and publish its rate statement, which outlines economic projection and the factors affecting the monetary policy decision. Fed Chair Janet Yellen is to hold what will be a closely watched a post-policy meeting press conference.
Later Wednesday, New Zealand is to release data on gross domestic product.
Thursday, March 19
Switzerland is to publish data on the trade balance.
The Swiss National Bank is to announce its Libor rate and publish its monetary policy assessment.
Later Thursday, the U.S. is to release reports on jobless claims, the current account and manufacturing activity in the Philadelphia region.
Friday, March 20
The BoJ is to publish the minutes of its latest monetary policy meeting.
The U.K. is to report on public sector borrowing.
Canada is to round up the week with data on consumer inflation and retail sales.