Euro to US Dollar Advances to new 3-month high

May 14, 2015 - Written by Tim Boyer

STORY LINK Euro to US Dollar Advances to new 3-month high

Euro to US Dollar Advances to new 3-month high

The Euro strengthened to its best level in 3-months against the US Dollar as concerns over the strength of the US economy dragged the ‘Greenback’ to multi month lows against a basket of major currency peers. The single currency advanced beyond the 1.14 level for the first time since February, the Pound Sterling climbed to its best level in six-months.

The cause for the US Dollar’s sharp declines was an increase in investor concerns that the world’s largest economy is faltering. The preceding sessions poor, US retail sales data was just the latest in a string of reports, which are suggesting that the much-anticipated spring recovery has not materialised. The retail sales report showed that sales were flat in April as households cut back on paying out for costlier items such as cars. The data spooked investors as it suggests that the US economy is struggling to rally after its post growth performance in the first quarter of the year. The data also caused investors to raise their bets that an interest rate rise by the Federal Reserve will not occur at all this year.

‘Hopes for a strong rebound are now fading. The likelihood of a near-term Fed action is almost zero now,’ said an economist from Standard Chartered Bank.

The Euro meanwhile surged higher against several major peers as it received a boost as German bund yields jumped to the highest levels in five months as broad selloff in the global bond markets continued. German bund yields act as benchmarks for European financial markets and higher yields push the euro higher against the dollar. Yields rise as prices fall.

‘The Euro is continuing to rebound, supported by the ongoing adjustment higher in Eurozone yields. This is in part supported by strengthening growth in the Eurozone and higher inflation expectations,’ said a London based currency strategist.
Further gains for the Euro are likely to be restrained as worries continue to persist over Greece. Earlier in the session, Greek Finance Minister Yanis Varoufakis said that the nation’s debts were not viable and that repayments to the European Central Bank should be delayed until the summer at the earliest.

Market attention will also focus on a speech due to be delivered by ECB President Mario Draghi to the International Monetary Fund in Washington. The US Dollar meanwhile could soften further if the latest US jobless claims data comes in below expectations.

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