Forex Markets: EUR/USD Hits New 7 Week Low
The euro fell to its lowest in more than seven weeks against the US dollar in recent forex trading activity and was poised to weaken further after a disappointing Italian bond auction stoked fears the eurozone crisis was deepening.
Italy paid a record 6.5 percent to borrow money over six months and its longer-term funding costs soared far above levels that are seen as sustainable. The rise in borrowing costs came even as the European Central Bank bought bonds in the secondary market.
Signs the eurozone debt crisis was threatening the region’s biggest economies such as France and Germany have raised fears of a breakup of the 17-member currency bloc.
Policymakers remained in disagreement over how to resolve the crisis, with Germany opposed to joint eurozone bonds and a bigger role for the ECB. A surprise pick-up in the German Ifo, a business sentiment survey, supported the euro, though traders said the data was unlikely to temper fears about the possibility the eurozone economy could face recession.
The euro also gained a brief boost on news that the European Central Bank is considering extending the terms of loans to banks to two or three years to prevent the eurozone crisis sparking a credit crunch. Investors looking to take a position on markets like EUR/USD and EUR/GBP can do so with Spreadex and ETX.
In recent trading activity, the US Commerce Department revised down its estimate of second-quarter economic growth to a 2 percent rate from an initial reading of 2.5 percent.
While growth was slower than expected, inventory accumulation amid sturdy consumer spending strengthened views that output would pick up in the current quarter. The US data added to concerns that politicians on both sides of the Atlantic are failing to tackle huge debt burdens.
The US Labour Department’s monthly jobs data is due soon and if they fall short of expectations, the euro should retrace its four straight weeks of decline against the greenback. The euro lost 2.1 percent after poor demand at a German bond auction in recent trading activity.
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