Overnight, the euro extended to a four-month high of 1.14475 against the United States dollar at around 1055. This was close to the euro/dollar peak of 1.1495 that appeared in early March.
There was a weakness in the dollar recently. Additionally, there was hope that European Union leaders would reach an agreement concerning the proposed coronavirus recovery fund at the EU Summit on Friday and Saturday. Thus, that combination of factors boosted the single currency.
Angela Merkel is a German Chancellor. On Tuesday, she had a news conference with Spanish Prime Minister Pedro Sanchez. The meeting was about Germany’s push for a compromise.
France believes that it is possible to reach an agreement on the budget and recovery plan. That is what the office of the French presidency said on Wednesday.
Derek Halpenny is an MUFG strategist. He said that optimism continues to build over the prospects of a more robust recovery in the eurozone than in either the United States or the United Kingdom. Halpenny added that the options market showed strong call demand for a euro/dollar rise.
The United States Dollar and Other News
He also said that their tracking of the demand for calls against that of puts shows a skew in favor of calls at an oddly high level.
Nevertheless, Halpenny said that an agreement on the recovery fund was unlikely. Moreover, Halpenny noted that the euro’s strength was, therefore, more realistic. This is because Europe has better growth prospects than the United States.
Also, Leuchtmann Commerzbank struck a cautious note about the European Union recovery fund. He said that, frankly, he does not think they will make a compromise before extremely late in 2020.
Moreover, Leuchtmann said that the euro could fall if the market is disappointed by the outcome of the summit.
The United States President, Donald Trump, has ended Hong Kong’s preferential status as a trading partner. China responded and said it would impose retaliatory sanctions on the United States.
Overnight, the offshore Chinese yuan hit a one-week high. Thus, by 1056 GMT, it was up by around 0.3% at 6.989.