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European Session – Euro slides over 1% to fresh 12-year low

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Photo: © Europen Parliament/P.Naj-Oleari pietro.naj-oleari@europarl.europa.euThe euro slid to fresh 12-year lows today against the dollar to touch 1.0559. With a light economic calendar, the main driver of the single currency was the European Central Bank’s quantitative easing program. The 1.1 trillion-euro bond buying program entered its third day today, with European central banks buying bonds and driving yields lower. German 10-year yields are at all-time lows. Yields fall when bond prices rise. Lower yields make assets in euros less attractive to investors so a lot of money is flowing out of the Eurozone. Meanwhile, the Federal Reserve is closer to raising interest rates and this is boosting the dollar.  Meanwhile Greece is also a concern to investors.

The euro fell over 1% today to 1.0559, the weakest since March 2003. It lost over 12% against the greenback so far this year. The single currency also weakened against the yen, to 128.31, the lowest since August 2013.

Against sterling, the euro fell to 0.7013, the lowest since November 2007. The pound however was down against the dollar at 1.4972. UK data on industrial and manufacturing production disappointed.

UK manufacturing production fell unexpectedly in January to dip of 0.5% compared with the previous month’s 0.1% increase. Meanwhile, the broader measure of industrial production fell month – on – month by 0.1%, against a 0.2% increase expected. However this was slightly better than the 0.2% fall in the prior month.

The dollar was slightly higher against the yen today, to trade to a high of 121.61, compared to yesterday’s low of 120.84. There are no US data releases today but the US bank stress tests results would be interesting to watch.

The next important event to look out for later in the day at 20:00 GMT will be the Reserve Bank of New Zealand’s monetary policy decision. There is no change expected in the 3.5% benchmark interest rate. The kiwi fell to a low of 0.7190 versus the greenback by 15:00 GMT today.

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