Euro Hits Three Weeks High Over News of ECB’s QE Easing Talks

The EUR/USD pair is trading in a sideways manner around 1.18 in Asia market hours, having clocked a three-week high of 1.1840 yesterday. The markets have been caught off guard by ECB’s hawkish talk. Hence, the spread between the 10-year US-German yield spread could drop further in the EUR-supportive manner. As of writing, the spread stands at 244 basis points – the lowest level since May 15. French President Macron has called on G7 leaders to strongly resist the US approach towards protectionist policies and this has caused analysts to predict that G7 summit could close on hard note with majority of meeting focusing on trade wards and with no clear expectations of outcome should such a situations break out has capped the growth of European currency at 1.184 price handle.

EURUSD Continues to Trade Strongly

The dollar has come under pressure this week as the euro bounced back from 10-month lows thanks to an ebb in Italian political concerns and speculation that the ECB could signal intentions to start unwinding its massive bond purchasing programme when it holds a policy meeting on June 14. The dollar wallowed near a three-week low against its peers on Friday as U.S. Treasury yields fell sharply, while the euro’s recovery remained intact amid expectations the European Central Bank will begin unwinding its stimulus program. The euro went as low as 1.1790 after rising to a three-week high of $1.1840 overnight. it was up more than 1 percent on the week and was set to post its biggest weekly gain since mid-February. The greenback was dragged down as U.S. Treasury yields fell sharply on Thursday on the back of receding risk appetite in the broader market on investor’s cautious stance as G7 summit is to begin in Canada later today.

The currency market will be flooded across next week as investors await G7 summit scheduled to start today which is followed by major events across globe next week. The latest moves in currencies are driven by developments in the bond markets. Risk aversion is taking place in such regions as Europe, which could see the ECB begin unwinding its stimulus. There are also concerns towards next week’s political and policy fixtures, such as the meeting and the U.S.-North Korea summit. Expected support and resistance for the pair are at 1.1780 / 1.1750 and 1.1840 / 1.1860 respectively.