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Euro Hits 8-Week Highs on Investor Optimism, Later Falls Then Rallies

May 28, 2020 at 13:53 by Simon Mugo

An inclined stack of 1 euro coinsThe euro today rallied to new 8-week highs against the US dollar as the bullish sentiment carried over from yesterday’s rally before reversing course and heading lower. The EUR/USD currency pair later fell amid fears of an escalation in US-China trade tensions that could trigger a new trade war before reversing course and heading higher.

The EUR/USD currency pair today fell from an initial high of 1.1035 in the Asian session to a low of 1.0991 in the mid-European session but had since recovered most of its losses.

The currency pair’s initial rally was attributed to investor optimism about the 750 billion stimulus package announced by the European Commission yesterday. The plan is facing opposition from “frugal four” led by Norway but has the backing of the larger nations, including Germany and France. The pair’s decline accelerated after the release of the disappointing Spanish retail sales data for April by the National Institute of Statistics. The pair started rallying after the release of the eurozone business climate, and economic sentiment indicators by the European Commission despite the prints missing expectations.

The currency pair extended its gains after the release of the preliminary German consumer price index report for May by the Federal Statistical Office. Both the headline and the harmonised prints were in line with consensus estimates, with one figure being better than expected.

The currency pair’s future performance is likely to be affected by tomorrow’s multiple Eurozone releases and geopolitical events.

The EUR/USD currency pair was trading at 1.1038 as at 13:52 GMT having rallied from a low of 1.0991. The EUR/JPY currency pair was trading at 118.92 having risen from a low of 118.48.

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