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Euro lifted by higher German bond yields
The euro was dominant in the Asian session, with the help of rising German bond yields. EUR/USD pushed past the key $1.13 level. The broad USD decline resulted in a loss of all the post-nonfarm payrolls gains. The inability of the US dollar to continue higher on Monday shows cracks in the core of the US dollar rally.
The European Central Bank governing council member Christian Noyer talk on Monday about the other reason for euro strength – economic performance. He said growth this year has been at the top end of what was expected. Questions and speculation about the ECB extending QE beyond Sept 2016 are dormant for the moment.
The dollar bulls was back in force on Friday after a strong US non-farm payrolls report but then faded as the most-important trend at the moment is the slump in Bund prices and hence a rise in yields, lifting the euro and spilled over into the DAX. The way the euro reasserted itself so quickly on Monday highlights the dominance of the bund market at the moment.
The main euro risk is Greece but despite the delay in coming up with a final deal, officials appear to be inching towards a compromise. More broadly, it appears the US dollar may need more than good economic news to reignite the rally. Given the painful moves on Monday, more dollar buyers could soon head for the sidelines.
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