The euro ticked up higher in the European session open and is holding steady amid optimism regarding the Italian bond sale later in the day.
The Italian government is planning to auction up to 4.75 billion euros ($6.09 billion) in five-year bonds, with the results of the sale due at about 10:15 GMT. The sale marks its first step in a challenging campaign of issuance for 2012.
Italy sells three-year bonds along with 2018 paper, and a good result could lead to further tightening in the difference between the rates it pays compared to German government bonds, a key measure of investor confidence.
EURUSD is currently trading in a range as investors are waiting on the sidelines though risk appetite appears more on the upside as it is hoped that the Italian debt sale will go the same way as Thursday’s successful Italian Treasury bill auctions and also a well received Spanish bond auction. Yields on Italian bonds are expected to move lower. Yields on Italian T-bills halved after yesterday’s sale. Spain sold double the targeted amount at its first bond auction of 2012.
Italy’s 10-year government bond was yielding around 6.5 percent on Friday compared to levels of around 7.0 percent before the Spanish debt auction.
A good auction result will produce a good rally in the EURUSD but brief as markets are still cautious about the sovereign debt crisis and with the weekend coming up.
EURUSD hit 1.2877 around 06:20 GMT.