Forex Market Review – Euro falls after Spanish bond yields rise; ECB holds rates

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Euro was unable to sustain gains made early in the European session when EURUSD rose 20 pips to a high of 1.3161 before falling to 1.3122. The single currency was under pressure after a Spanish bond auction resulted in higher yields, highlighting how vulnerable the Spanish debt market is. The European Central Bank decided in its policy meeting today to keep rates on hold at record low 1 percent. This helped support euro from a further fall. Markets are now positioning for  ECB President Mario Draghi’s press conference at 1230 GMT. He is likely to sound cautious on growth. If he signals increased willingness to expand monetary policy further, this will further weigh on the euro.

 

Sterling managed to hold steady against the dollar despite soft UK economic data showed the UK service sector, the largest sector in the country, grew less than expected in April. GBPUSD has been declining since Monday but remained above 1.6162 in the London session today. The pound was stronger against the euro, with EURGBP hovering around the 23-month low of 0.8111 hit on Wednesday.

 

The Swiss franc edged lower against the dollar after disappointing Swiss PMI for April, which indicated the euro zone’s debt troubles are hampering Swiss factories. USDCHF rose 30 pips to 0.9153. The franc is likely stay strong against the euro, with EURCHF mostly range-bound above the SNB exchange rate cap of 1.20 CHF.

 

Yen has been keeping the dollar and the euro on the downside, with little movement today. USDJPY traded up to 80.38 from 80.18. EURJPY hovers near a low 105.11.

 

Kiwi touched a three-month low after surprise rise in the jobless rate. NZDUSD fell to  0.8011 in the European session. New Zealand unemployment rose to 6.7 percent.