Euro Hits Two-Month High Against Dollar

Strong German business confidence boosted the euro in reaching its two-month high versus dollar as it maintained a firm stance against other major currencies on Monday. The euro was also notably supported through the lowered anxiety over political instability in Europe’s biggest economy.

The euro reached $1.1929, which was little changed when compared to late U.S. levels charted last week. It hit its highest level in two months a week ago at $1.1946.

The currency is now facing a test at $1.1965. This level is the 76.4 percent retracement of its decline from a 2 and a half year high of $1.2092 changed on September 8 to its 3 and a half month low of $1.1553 listed on November 7. It has now gained 3.2 percent from its low.

According to an economic report, the German business confidence index hit a record high in November, showing another sign of strong growth in the euro zone’s largest economy.

Following the upbeat data was positive political developments as German Chancellor Angela Merkel was given a political lifeline by the Social Democrats (SDP). This came after her chance for a fourth term was plunged into doubt last week when three-way coalition talks including pro-business Free Democrats (FDP) and Greens fell apart.

The political lifeline proved to be enough to ease worries regarding political instability of the country. Merkel’s conservative party agreed on Sunday to pursue a “grand coalition” with the SPD.

On the other hand, the persistent low inflation is seen continuously undermining the case for the Federal Reserve’s rate hike, making it seem impossible for the dollar to have any momentum.

Investors are now watching the Congressional hearing on Fed Chair nominee Jerome Powell which is bound for Tuesday.

Another focus is the tax reform plan submitted by President Donald Trump. Trump will have a meeting with the Senate Republicans on Tuesday in order to discuss their efforts on passing the tax reform legislation.

“First the Republicans have to agree on a plan between the Senate and the House of Representatives. Then that plan would need to be approved by the both chambers. That would need considerable time and effort,” stated senior strategist, Shin Kadota.

The dollar index (USD) retained its 92.801 which was near its two-month low of 92.675 recorded on Friday.

Sterling was at $1.3325, almost at Friday’s two-month peak of $1.3360.

The dollar slipped 0.15 percent against the yen to 111.35 yen, near Thursday’s two-month low of 11.07.

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