Euro gains against USD but weakens against commodity currencies

Published: Monday, 29 April 2013 16:00 BST - Written by Ben Hughes

STORY LINK Euro gains against USD but weakens against commodity currencies

The Euro has strengthened against the US Dollar as the Italian political crisis finally came to an end increasing demand for riskier assets, investors however remained cautious ahead of the European Central Bank meeting on Thursday as many expect the Bank to announce an interest rate cut.

The Euro was supported by high demand for Italian bonds after Enrico Letta became Prime Minister and ended the two-month long political stalemate that had paralysed the country. The ending of the uncertainty saw the demand for the safe-haven US Dollar and Japanese Yen decline.

The U.S. economy grew more slowly than expected in the first quarter and with inflation anchored, expectations are fading that the Federal Reserve could cut back its quantitative easing programme anytime soon, something which has weighed upon the Dollar. If the ECB choose to cut rates from the already record low level of 0.75% to 0.50% the Euro is likely to send the single currency falling sharply.

Against the Australian, New Zealand and Canadian Dollars, as well as the South African Rand the Euro weakened. The rise in demand and value of commodities such as crude oil, iron ore and gold gave all of the commodity based economy a boost.

The ‘Kiwi’ has made slight gains at the start of what is expected to be a risk heavy week. Central bank meetings and US employment figures are threatening to disappoint investors and send them seeking shelter in safe-haven currencies.

Tomorrow sees the release of New Zealand’s latest business confidence data which will give an indication as to how well the country’s economy is doing.

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