The euro rose on Tuesday to a one-week high after Germany’s trade data exceeded expectations, boosting hopes that the European Central Bank might try to pedal back its asset purchases.
The euro has dipped more than 3 percent against the dollar over the last month as the currency’s rising momentum decreased in recent days, due to political concerns. It rose half a percent to $1.1800 on Tuesday which is the euro’s highest since Oct. 2.
The change happened after Sabine Lautenschlaeger’s, European Central Bank executive board member, called for the ECB to roll back asset purchases in 2018.
Trade activity picked up in August as exports outweighed imports, evidence that Europe’s biggest economy performed strongly in the third quarter.
“The focus is shifting away from the political news to the economic data and that is turning to be euro positive and we should see the currency supported before the ECB meeting,” stated FX strategist Viraj Patel.
The Catalan Situation
The head of Asia-Pacific trading at OANDA, Stephen Innes, said that Lautenschlaeger’s comments seems to be in favor for the euro but because of ongoing political uncertainty, momentum had been lost and any near-term rallies will most certainly be capped.
On Oct. 26, the ECB is due to conclude whether to continue bond purchases next year and announcements about an outline to unwind its multi-year record stimulus plans will be disclosed later this month at its policy meeting.
Political developments are believed by some market watchers to make the ECB’s stand stay and force it to delay a rollback announcement beyond October’s review.
Catalan leader Carles Puigdemont recently proclaimed the region’s independence, resulting to the euro’s small pullback. Though after he explained the suspension of its effects will allow for talks with the Madrid government, the euro hit a session high.
“Anything that shows Catalonia is open to talks would be well received by European assets,” stated Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The Madrid’s IBEX stock index end at 0.9 percent in the regular session and was followed by an increase of IBEX 35 Index futures of 1.1 percent on Tuesday.
Stronger U.S. wages data led an up in the index as it was last at 93.47, down 0.2 percent on the day but still edged to a 10-week high of 94.267 as scaled on Friday.
The euro came out with strong data as it climbed its highest in a week and speculations on the Catalan situation as well as monetary policy commentary.
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