Positive International News Boosts Euro
The euro extended its bullish momentum during the first part of the European session yesterday, after positive Italian news and better than expected US Unemployment Claims figure led to an increase in risk taking among investors. Meanwhile, the Japanese yen continued its downward trend amid signs that the new Japanese Prime Minister will move to initiate fresh monetary easing policies. Today, traders will want to continue monitoring developments in the ongoing US “fiscal cliff” negotiations. In addition, the US Pending Home Sales and Crude Oil Inventories figures can potentially create market volatility.
Economic News
USD – US News Once Again Set to Create Market Volatility Today
The safe-haven US dollar continued to fall against its higher-yielding currency rivals during the first part of the day yesterday, as positive economic news out of both the euro-zone and US led to an increase in investor risk taking. That being said, disappointing US consumer confidence and homes sale data limited losses. Against the Swiss franc, the greenback fell close to 40 pips during the first part of the day, eventually reaching as low as 0.9095, before bouncing back to 0.9120. The GBP/USD gained more than 60 pips to peak at 1.6202 before dropping back to the 1.6170 level.
Today, traders will want to pay attention to the US Pending Home Sales report, scheduled to be released at 15:00 GMT. The figure is forecasted to come in at -0.3%, a significant decrease from last month that may result in risk aversion in the marketplace, which could help the USD recover some of its recent losses. That being said, any positive developments in the “fiscal cliff” negotiations will likely boost riskier currencies like the euro and AUD against the greenback before markets close for the weekend.
EUR – Euro Sees Gains ahead of Italian Bond Auction
The euro was able to extend its upward momentum against both the US dollar and Japanese yen yesterday as expectations for a positive Italian bond auction today generated risk taking in the marketplace. The EUR/USD gained more than 50 pips during the European session to eventually trade as high as 1.3280. Against the JPY, the common-currency took advantage of speculations that the Bank of Japan will soon initiate new monetary easing policies. The EUR/JPY was able to climb to a fresh 16-month high at 114.30.
The main piece of euro-zone news today is likely to be the Italian 10-year bond auction. Analysts widely expect the auction to show growth in the Italian economy, which if true, is likely to generate investor risk taking, which could boost the euro before markets close for the weekend. In addition, any indication that US lawmakers are closer to reaching a budget deal is likely to lead to euro gains against the dollar.
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