Euro, bond yields drive higher on European Central Bank scale-back bets

Euro, bond yields drive higher on European Central Bank scale-back bets

The euro started its upswing from $1.12 on Tuesday after ECB President Mario Draghi said in a speech that “a considerable degree” of stimulus is needed in the eurozone, a step back from the more dovish language used in earlier speeches.

Across the pond, the pound continues to bounce around, with cable up 0.29% at $1.27551 at the time of the report, the upside coming from hopes of positive progress in Brexit negotiations, following comments from chief negotiator Davis, though even the pound will be tested by Carney this week, with the BoE Governor perhaps wanting to put the record straight on monetary policy, following Haldane’s hawkish commentary last Wednesday.

A leap in the euro against the dollar was also putting pressure on stocks, as a stronger euro can cut into sales of goods made by European exporters to overseas clients. “So I would be long the euro on a tactical basis for the rest of the year”, JPMorgan Asset Management’s Global Market Strategist, David Stubb, said. All sectors fell, with tech, utilities and basic materials losing the most.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.32% at a fresh eight-month low of 95.873. The banking and insurance sectors however outperformed on expectations of higher rates. Britain’s FTSE 100 edged 0.1 percent higher, though, to 7,444.10.

Federal Reserve chief Janet Yellen had said in London that it was appropriate to “gradually” raise USA rates, although there was an acknowledgement that inflation had seen some slippage.

The dollar pushed lower to a fresh eight-month trough against the other major currencies in quiet trade on Wednesday, as a delay in a highly-anticipated US healthcare vote continued to weigh heavily on the greenback. Wall Street looked poised for a soft open with Dow futures and the broader S&P futures down 0.1 percent. It was spooked after the U.S. Senate delayed voting on a healthcare reform bill, rekindling worries about the timeline of Donald Trump’s business-friendly policies.

Following his comments, the euro rose to a 15-month high in overseas markets at one point on Tuesday, trading in the mid-127 yen range. LG Electronics Inc. fell 3.3 percent while SoftBank Group declined 0.1 percent and Sharp Corp. dropped 0.5 percent. Brent, the worldwide standard, gained 69 cents to $46.52 per barrel in London. Brent crude, the worldwide standard, lost 1 cent to $46.91 per barrel in London.

As reported at 11:03 am (BST) in London, the GBP/USD was trading at $1.2812, essentially flat; earlier the pair had hit a low of $1.27929 while the session peak was at $1.28346.