Euro Drops on High US Yields and Italy Budget Plans, Later Rebounds

The  euro today declined significantly against the  US dollar as the US 10-year Treasury yields hit a  7-year high and  investors reacted to  the  prospect of  lower global economic growth. The  tensions between Italy and  the  European Union regarding the  latter’s budget plans also dragged the  pair lower.
The  EUR/USD currency pair today dropped from a  high of  1.1502 in  the  Asian session to  a  low of  1.1429 in  the  mid-European session, but later recovered.
The  currency pair’s initial drop was largely triggered by  the  rising US 10-year Treasury yields, which hit a  high of  3.259% last witnessed in  April 2011. The  single currency was later dealt another blow when the  International Monetary Fund released its latest economic growth estimates where it lowered the  global growth outlook to  3.7%. The  IMF cited higher trade tariffs and weak emerging market growth as  reasons for  the  global slowdown. The  release of  the  German trade balance data for  August by  the  Federal Statistical Office had a  minimal impact on  the  pair despite the  print beating expectations by  1 billion euros.
The  pair later retraced some of  its loses as  the  US treasury yields dropped from their 7-year high of  3.259% to  a  modest 3.21%. President Donald Trump‘s comments regarding the  imposition of  new tariffs on  China further damped risk sentiment in  the  market capping the  pair’s gains.
The  currency pair’s future performance is likely to  be affected by  geopolitical events and  tomorrow’s US PPI data.
The  EUR/USD currency pair was trading at  1.1479 as  at  16:57 GMT having dropped from a  high of  1.1502. The  EUR/JPY currency pair was trading at  129.81 having declined from a  high of  130.22.

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