EUR Gains After Weak Data in US

The euro hit a three-month high against the dollar on Thursday, lifted by another lurch higher in euro zone government bond yields that again kept global stock markets in check.

Investors digested figures from the previous day that showed relatively strong euro zone economic growth in the first quarter, contrasting with disappointingly weak U.S. retail sales in April.

The euro shot above $1.14, bringing its gains against the U.S. currency in the last month to nearly 9 percent as the difference between benchmark U.S. and euro zone 10-year yields shrinks from the euro-lifetime high touched in March.

European stock markets clawed back opening losses on Thursday but struggled to make much headway, with investors worried about volatility and the tightening of financial conditions resulting from the spike in yields.

Asian stocks were broadly flat but Japan’s Nikkei 225 index fell 1 percent. U.S. futures pointed to a positive opening on Wall Street thanks to the dollar’s slide to a four-month low.

“The euro rally has continued today despite more stable German bond markets, suggesting the move is being driven by a weaker dollar,” Barclays wrote in a note on Thursday.

“European equities are broadly stable but the downtrend that started in mid-April remains in place.”

The euro was up two-thirds of one percent on the day at $1.1430, as the U.S.-German 10-year yield spread narrowed to a three-month low of 151 basis points. In mid-March, the dollar’s yield advantage over the euro was 193 basis points.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza