With US markets closed for holiday, it has been a quiet, low-liquidity European session, with Asia similarly subdued, while continued USD weakness, now in its 4th consecutive day, has been the main focus as Bloomberg’s dollar index approached its lowest level in three years, helping push the euro up to its strongest since 2014.
Indeed, in lieu of active equity markets, it’s been all about FX and the tumbling dollar and overnight the EURUSD rose to a new three year high just shy of 1.23 before easing off, while cable briefly rose above 1.38 – its highest level since Brexit – and the Mexican Peso was well supported by an unconfirmed Axios reports that was Trump softening his stance on Nafta, at least until Reuters denies it.
The Euro was boosted by growing expectations of tighter monetary policy from ECB, while the chance of a pro-European Union coalition in Germany also boosted confidence in the continent.
“The latest leg up in the euro has clearly come from optimism that the German government is moving towards an agreement for a coalition government,” said Investec economist Victoria Clarke.
