Euro Today: Euro and Pound Helped by Improved Market Sentiment

HONG KONG – The overnight surges left the euro and the pound sitting well in early Asia, helped by good employment data in the UK and a general improvement in investor sentiment on the strong retail sales in the United States and hopes of easing lockdowns in China.

The common European currency touched $1.0563 in early Asian trade, after rising 1.1% overnight, its strongest day of percentage gains since March.

The pound touched $1.2501 after a 1.4% rally overnight, its best day since the end of 2020, also helped by data that showed Britain’s unemployment rate hit its lowest point level in 48 years.

Those gains pushed the dollar index, which measures the greenback against six peers, as low as 103.18 in early Asia, its lowest in nearly two weeks.

“The pound was boosted by yesterday’s very strong jobs report, and on top of that there was a slight improvement in broader risk sentiment in financial markets, driven by positive news out of from China on lockdowns and strong data from the United States,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

Shanghai on Tuesday reached its long-awaited milestone of three consecutive days with no new COVID-19 cases outside quarantine zones having set its clearest timetable yet for emerging from a lockdown the previous day.

U.S. retail sales rose sharply in April as consumers bought more motor vehicles amid improved supply and increased restaurant spending.

Also reflecting improved risk sentiment, stocks jumped overnight and yields on benchmark US Treasuries rose, and were last at 2.9878%.

Overnight, Federal Reserve Chairman Jerome Powell told a Wall Street Journal event on Tuesday that the Fed will “continue to push” to tighten U.S. monetary policy until be clear that inflation is slowing down.

While the dollar briefly pared its losses after Powell’s remarks, it then resumed its decline.

Rising yields helped halt the yen’s recent small rally, as the Japanese currency is very sensitive to higher rates in the United States. The yen was last at 129.28 to the dollar, little changed on the day.

The Aussie dollar was in the lead, helped by improving risk sentiment and trading at $0.7035, extending a 0.8% gain on Tuesday.

The Aussie was also helped by minutes of a central bank meeting released on Tuesday which suggested the Reserve Bank of Australia would raise interest rates again in June.

Cryptocurrency markets were pretty quiet. Bitcoin was barely changed at around $30,400.

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