The gap between US Treasuries and German Bunds narrowed, providing the common currency Euro with another lift, even in spite of an unexpected disappointment in Germany’s GDP figures. A month ago, the gap between the US and Germany’s 10-year sovereign debt instruments had been 180 points but that has since dropped to 157, and currency strategists believe that Germany’s Bunds are likely to be a key EUR/USD driver in the short term. Germany’s statistics bureau had earlier reported that 1st quarter growth had slowed to 0.3%, well below the consensus call for 0.5%. At the same time, France grew by 0.6%, a pace not seen in two years, and above expectations of a rise to 0.4%. Germany and France are considered Europe’s economic drivers.
As reported at 9:03 (BST) in London, the EUR/USD was trading at $1.1260, a gain of 0.4%, while the EUR/JPY was up to 134.81 Yen, a gain of 0.3%. The US Dollar Index traded at 94.375 .DXY, a loss of 0.2% and well off Monday’s peak at 95.258 .DXY.
[CAD:FXAcademy CTA #75]US Retail Sales to Drive Dollar
Markets attention will turn to the US for the release of retail sales figures later today; as an economy dependent upon the consumer these figures will give investors a better handle on the timing of a possible rate increase from the Federal Reserve Bank. Expectations are that retail sales will have risen 0.2% last month, and a disappointment in the reading could suggest that the Fed is right to postpone a policy change at this time.