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The euro moved above USD1.24 Thursday.
Written by article default Thursday, 17 June 2010 06:36
Market OverviewThe euro moved above USD1.24 Thursday, extending gains made as demand for riskier assets rose following a reassuring bond auction in Spain.
The euro had been ahead going into the North American session after good demand at the Spanish bond auction kept fears contained about the euro-zone debt crisis. In recent trading, the euro extended its gains to hit a fresh intraday high of USD1.2412.
The morning's dose of U.S. economic data had little immediate effect on trading. U.S. consumer prices fell a second straight month during May and underlying inflation rose slightly, leaving the Federal Reserve with room to keep interest rates low to support economic recovery.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 85.668 from 86.142.
The U.S. consumer price index dropped 0.2% last month. In April, prices fell an unrevised 0.1%, as economic slack restrains inflation. Underlying consumer prices, which strip out volatile energy and food items and are closely watched by the Fed, rose 0.1% in May. This core rate of inflation was unchanged in April.
In the other key development for currencies overnight, the Swiss National Bank appeared to soften its tone in regard to the franc's appreciation. The SNB has been intervening heavily in the market of late, buying Euros and selling francs in an effort to limit the appreciation of its currency.
Market expectation
Next week's emergency U.K. budget is make-or-break time for sterling because it will determine whether the country holds onto its cherished triple-A credit rating.
The currency has proven to be extremely sensitive to ratings news in recent months, and next Tuesday's budget from the new government is seen as the big push to fix the country's public finances and ensure that top-notch rating remains in place.
With markets generally highly nervous about sovereign debts in the neighboring euro area, the stakes are high, and any budget missteps in either direction could hit the already wobbly pound hard.
EUR dipped briefly to USD1.2880 and then rebounded in choppy trading after the Phila Fed manufacturing business index unexpectedly dropped to 8.0 in June from 21.4 in May vs the expected reading of 21.0. EUR has since rebounded to the USD1.2400 area, suggesting some underlying resilience for the common currency in today's trading environment.