Euro Advances Amid Risk Appetite, Upbeat German Inflation

05:41, 29th June 2016

(RTTNews) - The euro firmed against its major rivals in European deals on Wednesday, amid a rally in European stocks and as data showed that German consumer prices grew at the fastest pace in three months in June.

Preliminary estimate from Destatis showed that consumer prices rose 0.3 percent from last year, following a 0.1 percent increase in May. Prices have increased for the second straight month. A similar pace of increase was last seen in March.

European stocks rallied for the second consecutive session, on hopes for policy actions by the central banks and governments to limit the impact of Brexit turmoil in financial markets, and as oil extended overnight gains on prospects of slower production and supply declines.

While expectations for another Fed tightening receded after the Brexit vote, the Japanese Prime Minister Japan Shinzo Abe vowed to implement a decisive policy response so as to minimize the spillovers produced by Brexit to the nation's economy.

In other economic news, data from the market research group GfK showed that German consumer confidence is set to improve in July as their spirits are yet to be affected by discussions surrounding the impact of Brexit on the largest euro area economy.

The forward-looking consumer sentiment index rose to 10.1, while it was expected to remain unchanged at 9.8.

The currency showed mixed trading in Asian deals. While the euro held steady against the franc and the greenback, it dropped against the pound and the yen.

The single currency strengthened to a 5-day high of 1.0884 against the Swiss franc, compared to 1.0863 hit late New York Tuesday. On the upside, 1.10 is likely seen as the next resistance level for the euro.

Survey data from the UBS investment bank showed that Swiss consumption indicator increased in May, although the indicator was adversely affected by the recently released employment figures for the first quarter.

The indicator rose to 1.35 points in May from 1.24 in April, which was revised down from 1.47. This was due to weaker than expected employment figures in the first quarter of this year.

The euro resumed its early gains against the greenback, trading at a 5-day high of 1.1118. At Tuesday's close, the pair was valued at 1.1064. The next possible resistance for the euro-greenback pair may be located around the 1.13 zone.

The 19-nation currency strengthened to a 5-day high of 114.22 against the Japanese yen, up by 0.5 percent from yesterday's closing value of 113.68. If the euro-yen pair extends rise, 116.00 is possibly seen as its next resistance level.

Data from the Ministry of Economy, Trade and Industry showed that Japan's retail sales were flat on a seasonally adjusted monthly basis in May.

That was in line with expectations following the 0.1 percent decline in April.

Bouncing off from an early low of 1.4367 against the loonie, the euro edged up to 1.4453. Extension of the euro's rise may lead it to a resistance around the 1.46 area.

On the flip side, the euro fell to a 2-day low of 0.8221 against the pound, compared to yesterday's closing value of 0.8292. The euro is seen finding support around the 0.80 region.

Data from the Bank of England showed that U.K. mortgage approvals increased in May and secured lending accelerated from April.

The number of loans approved for house purchases rose to 67,042 from 66,205 in April. It was expected to fall to 65,000.

Looking ahead, U.S. pending home sales data for May and U.S. crude oil inventories data are due shortly.