Euro Extends Rally
August 12 2015 - 7:03AM
RTTF2
The euro continued to be firmer for the second consecutive day
on Wednesday, as the difference or spread, between the benchmark
10-year US-German bond yield narrowed sharply.
While the yield on German 10-year bonds fell 0.615 percent, the
U.S. equivalents fell 2.09 percent, the lowest in over three
months. The spread between 10-year US-German bond yields declined
to 145-146 basis points, adding to the strength in the euro.
Investors rushed to safe-haven German bonds and Treasuries,
thereby weakening their bond yields, after China let the yuan to
fall sharply for the second day running. Yields move inversely to
bond prices.
Optimism over developments in Greece also underpinned the
currency. Greece locked up its third bailout deal with its
international lenders on Tuesday, paving the way for a Parliament
vote on the deal before an August 20 debt payment to the European
Central Bank.
In economic news, data from Eurostat showed that Eurozone
industrial production declined more than expected in June.
Industrial production dropped 0.4 percent in June from May, when
it decreased by revised 0.2 percent. This was the second
consecutive fall in production.
The currency has been rallying since yesterday, after Greece
concluded EUR 86 billion bailout deal following marathon talks.
In European trading, the euro appreciated to 138.79 against the
Japanese yen, its highest since June 25. The next possible
resistance for the euro-yen pair is seen around the 139.5 zone. The
pair was worth 138.14 at yesterday's close.
The latest figures from the Ministry of Economy, Trade and
Industry showed that Japan's industrial production increased more
than initially estimated in June.
Industrial production grew a seasonally adjusted 1.1 percent
month-over-month in June, revised up from a 0.8 percent rise in the
flash data. In May, production had fallen 2.1 percent.
The euro spiked up to more than a 4-week high of 1.1158 against
the greenback, up from Tuesday's closing value of 1.1042.
Continuation of the euro's uptrend may take it to a resistance
around the 1.13 area.
The single currency strengthened to 1.0962 against the franc, a
level not seen so far this year. The euro is seen finding
resistance around the 1.12 level. At yesterday's close, the pair
was quoted at 1.0782.
Data from Mannheim-based Centre for European Economic Research
and Credit Suisse showed that Switzerland's economic expectations
rebounded in August, indicating an improvement in economic
activity.
The ZEW-CS economic expectations indicator rose 11.3 points to
5.9 in August from -5.4 in July.
The 19-nation currency that ended yesterday's trading at 0.7089
against the Sterling climbed to more than a 4-week high of 0.7170.
If the euro extends rise, it may challenge resistance around the
0.725 level.
Data from the Office for National Statistics showed that U.K.
jobless claims declined unexpectedly in July.
The number of people claiming unemployment benefits declined by
4,900 in July from June, while it was expected to rise by 1,000.
The claimant count rate held steady at 2.3 percent as expected by
economists.
The euro advanced to 1.4579 versus the Canadian dollar for the
first time since December 2014. On the upside, the euro may locate
resistance near the 1.47 mark. The pair ended Tuesday's trading at
1.4478.
Looking ahead, U.S. monthly budget for July is set to be
announced in the New York session.
At 8:30 am ET, Federal Reserve Bank of New York President
William Dudley is expected to speak before the Rochester Business
Alliance on the local economy and the benefits of workforce
development in Rochester, New York, U.S.
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