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

October 9, 2018 at 17:06 by Simon Mugo

Euro coins stand on euro banknotesThe 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.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

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