EUR/USD unable to rise above 1.1200, drops to 1.1170
- Euro hits fresh lows versus the US Dollar as DXY extends gains.
- While greenback recovers from last week slide, the Euro shows growing weakens.
The EUR/USD pair dropped more than 20 pips in a few minutes and fell to 1.1168, reaching the lowest level since last Thursday. As of writing it is hovering around 1.1175, losing ground for the second-day in-a-row.
The Euro continues to retreat after the sharp rebound from multi-year lows lost strength above 1.1200. After being unable to hold on top, it pulled back and now is again below the 20-day moving average. The recent slide of the Euro took place amid a rally of the greenback and a decline of the Swiss franc. USD/CHF jumped above 1.0080 while EUR/CHF soared to 1.1275, the highest level in six days.
The positive tone regarding the Euro after the European parliamentary elections eased. Today’s discussions between Italian policymakers and the European Commission generate some concerns about the future relationship.
“While the politics of Brussels can be expected to remain a diversion for markets for the remainder of the year, the emboldened position of Italy’s populist League in the weekend’s European parliamentary elections also has the capacity to weigh on the EUR. Deputy PM Salvini has called for a “fiscal shock” of tax cuts to invigorate Italy’s flagging economy. He plans to move ahead with a pledge to cut incomes taxes to 15% despite threats from Brussels to fine the Italian government for breaching budgetary rules. While some commentators have argued that Salvini’s policies will marginalise Italy, the threat for the EUR is that investors will continue to view populism as a disruptive force”, said Rabobank analysts. They see the EUR/USD likely to move lower to the 1.10 area on a 3 month “with the USD likely benefiting from safe haven flows on signs of slower world growth.”
Data from the US today came in above expectations but mixed. Housing prices continue to slowdown while consumer confidence rose more than expected. The next key report in the US will be the second estimate of Q1 GDP growth to be released on Thursday.
The US Dollar Index is higher today as it continues to recover after last week slide. The decline in US bond yields has not weakened the demand for the dollar that managed to climb even again the yen.