The euro was broadly higher on Thursday as German yields soared on easing deflation fears, while doubts about the strength of the U.S. recovery took a temporary toll on the dollar. Bund yields posted their biggest daily rise in two years after German annual inflation accelerated faster than forecast in April, suggesting the euro zone is pulling away from deflation.
The euro came within a whisker of $1.1200, pulling well away from this month’s low of $1.0521. It also powered toward 133.00 yen, reaching highs last seen on March 5. Against sterling, the common currency scaled a two-week peak of 72.28 pence. In contrast, data showed the U.S. economy nearly stalled in the first quarter. A statement from the Federal Reserve, issued a few hours after the GDP data, said the slowdown was probably transitory but still suggested any interest rate hike will not happen soon.
“Our assessment is that September remains the next most likely time for the Fed to move,” said David de Garis, senior economist at NAB. The dollar index .DXY fell as far as 94.678, reaching a low not seen since late February. It was last at 95.194.
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