The dollar soared against major currencies last week, as expectations of a stronger U.S. economy dented demand for higher-risk assets like the euro and pound. Volatility in the FX markets remains evident with the start of the year, and the euro was again the high-profile victim of the stronger dollar, falling 0.78% during last week to $1.3670 – the biggest daily percentage decline against the dollar since November. last week, the common currency ended the its first slim trade lower against its US counterpart, having lost ground Thursday on the heels of upbeat employment and manufacturing reports from the world's largest economy. US economic data released last week gave little push to the market, where the ISM manufacturing index for December held near a 2-1/2-year high and the number of unemployed people filing new claims for jobless benefits fell again last week, suggesting the world`s largest economy was on stable footing. In another sign of the euro`s weakness this year, the euro fell 1.49% last week after hitting a record 26.6% against the Japanese currency in 2013, the euro`s biggest yearly rise versus the yen since the single currency was launched in 1999. The dollar strength is expected to the beat the euro amid expectations US economic growth in 2014 will outpace the recovery in Europe and other regions, which would boost the Federal Reserve case to continue reducing its stimulus program. On the other hand, euro volatility will probably dominate the trade next week ahead of the European Central Bank (ECB)'s rate decision on Thursday. The ECB is expected to keep the benchmark interest rate unchanged, but traders be eager to welcome any hints about the possible introduction on negative interest rate, which could force further pressure on the single currency in the coming days. Moreover, the macro calendar will be include Eurozone/ German services PMIs, Eurozone consumer confidence and German inflation reports, so stay tuned!
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