Sunday 22 October 2017

Euro hits two-and-a-half year high on prospect of QE taper

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)

The euro climbed to a two-and-a-half year high against the dollar yesterday after European Central Bank comments did little to deter market bulls who ramped up bets the single currency remained broadly undervalued against its rivals. A euro bought just over 91 pence sterling.

A Reuters report that central bank officials were in broad agreement that their next step would be to reduce their bond purchases supported the currency and pushed bond yields higher.

Broadly, the dollar's renewed weakness against its rivals over the last 24 hours indicated that fresh momentum was building behind the euro's rise. "The euro continues to be undervalued and the market is eager to correct that undervaluation after [Mario] Draghi's comments," said Kit Juckes, a strategist with Societe Generale in London.

Fears that the euro's rally would hurt profits at Europe's large exporters has weighed on regional stocks in recent months. The pan-European STOXX 600 is down about 6pc from its May highs.

Yesterday, it came off its lows as the bounce in European government bond yields after the Reuters story on the ECB helped bank shares. In Dublin the Iseq was up .034pc at 6,681.82.

US stock futures were 0.3pc lower, indicating a lower opening on Wall Street. There, the market's focus is increasingly shifting to a series of natural disasters hitting North American coasts and worries that Pyongyang could launch another missile test today, North Korea's founding day, keeping risk appetite in check going into the weekend.

Hurricane Irma was bearing down on Florida even as Texas struggles with the devastation caused by Hurricane Harvey.

Oil markets were mixed yesterday, with Brent crude supported by expectations that Saudi Arabia could cut its October supplies, while US crude was weighed down by refinery outages.

Reuters

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