Published: Sat, January 13, 2018
IT | By Lester Massey

Euro soars after European Central Bank says it could revisit policy message soon

Euro soars after European Central Bank says it could revisit policy message soon

The S&P 500 and Nasdaq both registered an eighth record closing high out of the first nine trading days of 2018, while the Dow boasted its sixth closing high of the year. While economic growth is robust, inflation is certainly missing. "If any of those were to be shaken that would be a big problem", said Jeanne Asseraf Bitton, head of cross-asset research at Lyxor Asset Management.

When the euro was created some 15 years ago, there was speculation that the new currency might come to challenge the dominance of the USA dollar as the global reserve currency of choice. The 28-page deal reached in a marathon negotiating session that lasted more than 24 hours at the end of almost a week of talks was enough for leaders of Merkel's two-party Union bloc and the Social Democrats to recommend moving on to formal coalition negotiations. On Wednesday, the pan-European index fell 0.4% (http://www.marketwatch.com/story/dax-drops-1-as-european-stock-rally-pauses-but-bank-shares-rise-2018-01-10), pulling back from a 2 1/2 -year high.

The euro's rise weighed on the dollar index, which measures the greenback against six rival currencies. It should be mentioned that yesterday's PPI figures out of the U.S. surprised to the downside.

With the euro zone seeing its best growth in a decade, the European Central Bank should gradually shift its stance to avoid a more disruptive move later and should look at a broader revision of its policy guidance to reduce the focus on bond purchases and raise the emphasis on interest rates, the accounts showed.

The ECB has pledged to continue its bond purchase programme at least until September and investors expect any rate increase to take place next year. The all-important 10-year yield hit its highest level since March on Tuesday.

The kiwi gained to 4.7080 Chinese yuan from 4.6838 yuan on Thursday after the Chinese government quashed speculation it was considering cutting its purchases of US Treasuries.


In the US bond market, benchmark 10-year notes last fell 3/32 in price to yield 2.5605 percent, from 2.549 percent late on Wednesday.

USA government debt yields slipped Thursday but held near highs after the European Central Bank said it may adjust its guidance to investors given the strength in the European economy.

The kiwi was little changed at 60.21 euro cents from 60.14 euro cents on Thursday, and ANZ's Zollner said the prospect of tighter monetary policy in Europe earlier than expected should cap the cross, which has support at 58.80 euro cents and faces resistance at 60.80 cents.

It traded at $13,445.00 on the Bitstamp exchange, up 1.5 per cent but not far from Thursday's low of $12,800, which was its lowest since Dec 31.

Oil prices rose about 1 percent to three-year highs on Thursday, pushing the global Brent benchmark past $70 a barrel, on further signs of tightening supply in the United States and expectations that OPEC's output cuts would underpin the market.

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