Euro Rises To Highest Level In More Than A Week Against US Dollar

Traders have been selling the US dollar and bidding the British pound and Euro higher in the currency markets in the Asian and European session. Since no US data is planned for today, movements in the currency market during the US session will depend on how US stocks react today. The US dollar has lost some of its allure as traders are now expecting the US Federal Reserve to hike interest rates in September rather than in August or even next week when the FOMC meets.

The Euro is up against the US dollar, hitting a so-far high around 1.5625, the highest level in more than a week. Nearest resistance is 1.5630 then 1.5650. According to the Financial Times, ECB’s Bini Smaghi said that higher rates in the Eurozone may be needed to offset price pressures. His hawkish tone will prop the Euro going into the weekend. Meanwhile, data release today showed that German May producer price index rose 1% on month, and 6% on the year, stronger than what most economists expected, thus underlining the ECB’s concern for inflation threats in the Eurozone.

The British pound continued its ascent against the greenback by rallying 90 pips from 1.9700 to a session high around 1.9790. Aggressive buying of the Pound has faded away after Bank of England Deputy Governor John Gieve told business leaders that UK house prices will extend their slide, hurting consumer confidence. He said property values “have further to fall” and the “shock to expectations appears to be having a wider impact on confidence.” UK gilts went up after a two-day decline after his comments.

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