Forex Market Review – Euro bounces above $1.31 after Spanish bill auction

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The euro was lifted above $1.31 against the dollar in the European trading session after this morning’s Spanish T-Bill auction helped improve risk sentiment. The better than expected auction saw the Spanish government selling above target, for a total of 3.178 billion euros versus the 2 – 3 billion  euros planned. This resulted in the Spanish 10-year bond yields easing from the key 6 percent level which was breached yesterday. Additionally, a better German ZEW investor sentiment index also buoyed the single currency. EURUSD rose to a session high of 1.3171, gaining over 80 pips from the early low of 1.3089. Despite the somewhat positive news today, the overall outlook for the euro remains bearish. Thursday’s Spanish bond auction is more substantial and the focus will shift to that.

 

Meanwhile, mixed US data on housing starts and building permits caused little action.

 

Sterling strengthened after higher than expected inflation data and its implications for monetary policy. CPI on an annual basis accelerated to 3.5 percent in March from February’s 3.4 percent.  The general view of the markets is that the Bank of England will not be inclined to expand QE (quantitative easing) further in May but more will be revealed in the BOE monetary policy minutes of the April meeting tomorrow. GBPUSD climbed to a session high of 1.5969 from 1.5869. The broadly firmer pound pressured the euro, with EURGBP falling to 0.8228 from 0.8258.

 

USDJPY opened in Europe at 80.38 and broke out of sideways price action from the Asian session to rise to 80.73 on slightly better risk appetite in Europe. EURJPY opened the session at 105.35 and climbed to a high of 106.30 tracking the EURUSD higher after the Spanish debt  auction results.

 

The Canadian dollar was firmer against its US counterpart this morning as the market looks towards the Bank of Canada interest rate decision and policy statement. Rates are forecast to stay on hold at 1.0 percent and a more hawkish tone from the BOC is expected. The focus will be on any hints to an upward revision to GDP growth and inflation in the statement. USDCAD fell 0.5 percent to 0.9952.