Euro slumps to 9- month low against the Dollar
The euro hit a fresh nine-month low against the euro as widening interest rate differentials between the US and Europe combined with last week’s better-than-expected US trade data to extend the single currency’s recent slide.
The dollar rose 0.5 per cent against the euro to $1.2050, after touching $1.2036, its strongest level since early September 2004.
Last week’s comments from Federal Reserve chairman Greenspan about the potential for further monetary tightening in the world’s largest economy continued to underline interest rate differentials between the US and the eurozone, while weekend comments by European Central Bank Council member Issing suggesting the ECB may be slowly moving toward monetary easing further highlighted the gap.
The rhetoric has helped drive 10-year eurozone bond yields 90 basis points below 10-year Treasury bond yields, the widest gap since the end of March.
This week, analysts were expecting US producer price inflation data, released on Tuesday, and consumer price inflation data, released on Wednesday, to be the centre of market attention, however given the pullback in energy prices over the month analysts were expecting overall US inflation data to be well contained.
The dollar also made gains against the yen, rising 0.4 per cent to hit an eight-month high of Y109.25, boosted by a downward revision of Japanese first-quarter GDP. Real GDP grew 4.9 per cent on an annualised basis compared to the initial estimate of 5.3 per cent.
Sterling hit its lowest level since October against the strengthening dollar, trading down 0.4 per cent to $1.8030, as producer price data revealed that UK input prices rose 0.3 per cent in May. The data meant the margin squeeze on UK manufacturers was likely to get worse. This looks likely to prevent manufacturing from experiencing a robust recovery so output will struggle in the second quarter. Against the euro, sterling was unchanged at £0.6683.
The dollar rose 0.5 per cent against the euro to $1.2050, after touching $1.2036, its strongest level since early September 2004.
Last week’s comments from Federal Reserve chairman Greenspan about the potential for further monetary tightening in the world’s largest economy continued to underline interest rate differentials between the US and the eurozone, while weekend comments by European Central Bank Council member Issing suggesting the ECB may be slowly moving toward monetary easing further highlighted the gap.
The rhetoric has helped drive 10-year eurozone bond yields 90 basis points below 10-year Treasury bond yields, the widest gap since the end of March.
This week, analysts were expecting US producer price inflation data, released on Tuesday, and consumer price inflation data, released on Wednesday, to be the centre of market attention, however given the pullback in energy prices over the month analysts were expecting overall US inflation data to be well contained.
The dollar also made gains against the yen, rising 0.4 per cent to hit an eight-month high of Y109.25, boosted by a downward revision of Japanese first-quarter GDP. Real GDP grew 4.9 per cent on an annualised basis compared to the initial estimate of 5.3 per cent.
Sterling hit its lowest level since October against the strengthening dollar, trading down 0.4 per cent to $1.8030, as producer price data revealed that UK input prices rose 0.3 per cent in May. The data meant the margin squeeze on UK manufacturers was likely to get worse. This looks likely to prevent manufacturing from experiencing a robust recovery so output will struggle in the second quarter. Against the euro, sterling was unchanged at £0.6683.
posted by Drs Search @ 10:04 PM
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