Euro roars to fresh highs amid US stimulus concerns

The euro continued to march higher on Wednesday, approaching the 1.16 level this morning amid ongoing improvements in market sentiment and concerns over the state of the US economy.

The expiration date for the additional $600 a week unemployment insurance benefit in the US is fast approaching, with no signs yet of an agreement in Congress. There have been reports that the Republicans are hoping to extend the programme, although at a much reduced rate of $100 a month. This has far from been greeted positively by the market, with investors continuing to push the dollar lower across the board. As the market awaits news out of the US, currency traders continue to view the EU’s recent fiscal rescue package announcement as a major positive for the Euro Area economy, sending the euro sharply higher this week.

Compounding the misery for the dollar was a weak set of housing data out of the US yesterday, with existing home sales not rising as much as economists had anticipated in June. Of greater importance to the market will be data out today and tomorrow, namely this afternoon’s weekly jobless claims figures and tomorrow’s PMI data from Markit.

Pound steady as investors await Brexit news

Sterling was relatively stable just above the 1.27 level versus the dollar yesterday afternoon, recovering losses from earlier in the day.

The final day of Brexit talks between the UK and European Union in the current round of negotiations continue today, as both sides aim to find some common ground ahead of the end of the transition period at the end of the year. A handful of reports, albeit rather untrustworthy ones, suggest that Britain is ready to walk away from the table without a deal in place. We’ve not really seen any panic just yet in the FX market, although any pessimistic rhetoric from either side that suggest a deal may not be reached could hurt the pound today.

Aside from political news, the next 24 hours or so could be a very important one in terms of UK economic data. First up will be tomorrow morning’s UK retail sales data for June. This will then be followed by the monthly business activity PMIs for July.