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Forex - EUR/USD falls on yawning interest rate differential

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Investing.com -

Investing.com - The euro fell against the dollar and most other major currencies on Monday after yield differentials between U.S. and European debt widened due to diverging monetary policy paths on both sides of the Atlantic.

In U.S. trading, EUR/USD was down 0.38% at 1.3592, up from a session low of 1.3582 and off a high of 1.3668.

The pair was likely to find support at 1.3503, Thursday's low, and resistance at 1.3677, Friday'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 and boosted the dollar.

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, while solid U.S. unemployment data kept expectations firm for the Federal Reserve to wind down its monthly asset-purchasing program this year.

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 dollar, meanwhile, continued to see support on solid U.S. unemployment data.

On Friday, the U.S. Labor Department reported that the economy added 217,000 in May, close to expectations for a 218,000 increase, after a 282,000 rise in April, whose figure was revised down from a previously estimated 288,000 gain.

The private sector added 216,000 jobs last month, exceeding expectations for a 210,000 gain, which drew market applause and firmed the dollar.

It was the fourth consecutive month in which the U.S. economy added more than 200,000 new nonfarm payrolls.

The private sector added 216,000 jobs last month, exceeding expectations for a 210,000 gain.

Elsewhere, the euro was down against the pound, with EUR/GBP down 0.34% at 0.8094, and down against the yen, with EUR/JPY down 0.37% at 139.36.

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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