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European Session – Euro at 12-year low on Greece and ECB QE

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FB-euro_notes4Currency markets took on a risk-off tone today with the main concern revolving around Greece but also on the effect of the European Central Bank’s bond-buying program.

The Eurogroup meeting on Tuesday ended with little progress but detailed talks are due to take place on Wednesday on a technical level. Greece needs to finalize a reform package before it runs out of money at the end of the month and so it needs to be able to receive the bailout funds.

The euro continued to fall against the dollar today and is approaching closer to parity. It touched a near 12-year low today at 1.0721.

The single currency was also under pressure from lower Eurozone debt yields after the ECB launched a 1 trillion bond buying program this week. The demand for bonds from the ECB drove up bond prices and hence pushed down yields.

In terms of Eurozone economic data released this morning, they did not have much impact on the markets. French industrial output was stronger – than – expected in January, rising 0.4% instead of falling by 0.3% as forecast but down from a prior 1.4% increase.

The euro also fell against the yen to touch a low of 129.95, a September 2013 low. The Japanese currency meanwhile was generally stronger today due to risk aversion and safe haven demand. The dollar fell versus the yen to 120.91 following a test of the 122.00 level earlier in the day. The greenback however, is expected to strengthen against the yen and the euro due to the diverging monetary policies of the Fed and the Bank of Japan and the ECB.

During the early US session, the JOLTS report was published showing the number of job openings in the US rose to the highest in 14 years. Job advertisements rose 2.5% to nearly 5 million, the most since January 2001 but was below forecast. The upbeat data helped pause the decline of the dollar against the yen.

In the UK, the Bank of England Governor Mark Carney gave a testimony to the Economics Affairs Committee in the House of Lords in Parliament. Carney said rate increases were likely to be limited and gradual. He also commented that there was a case for moving the inflation target if there was a prolonged supply shock. The pound held steady during his speech. During the day so far, cable traded between a range of 1.5027 and 1.5099.

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