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Forex - EUR/GBP falls as European borrowing costs drop

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Investing.com -

Investing.com - The euro traded at session lows against the pound on Monday after yield differentials between U.S. and European debt widened due to the European Central Bank's recent decision to loosen monetary policy.

In U.S. trading, EUR/GBP was down 0.39% at 0.8090, up from a session low of 0.8089 and off a high of 0.8122.The pair was likely to find support at 0.8065, Thursday's low, and resistance at 0.8150, Wednesday's high.

The European Central Bank's recent decision to loosen policy coupled with expectations for the Federal Reserve to wind down stimulus programs this year reflected in bond markets on Monday, which weakened the euro against most major currencies, including the pound.

As a result, Spain can borrow money more cheaply than the U.S. can, markets revealed earlier.

The yield on Spain's 10-year bonds fell to 2.6% on Monday, falling below their U.S. equivalent which was yielding 2.61%. The yield on Ireland's 10-year bonds fell to a euro-era record low of 2.61% while the yield on German 10-year bonds fell to their lowest against their U.S. counterpart since 2005.

Last Thursday, the ECB unveiled a package of measures to battle persistently low inflation rates in the euro area, including cuts to interest rates.

Elsewhere, data on Monday showed that euro zone investor confidence deteriorated unexpectedly in June despite the ECB's new measures to support growth and inflation.

The Sentix investor confidence index fell to 8.5 this month from 12.8 in May, confounding expectations for a jump to 13.2.

The euro was down against the dollar, with EUR/USD down 0.41% to 1.3587, and down against the yen, with EUR/JPY down 0.43% at 139.28.

On Tuesday in the euro zone, France is to publish data on industrial production. Elsewhere in Europe, Switzerland is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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