London: The euro climbed to a six-month high, rebounding from an early decline, after Chancellor Angela Merkel said the common currency was “too weak.”
The dollar stabilised in a narrow range following the biggest weekly slump since July.
Europe’s common currency rose as much as 0.3 per cent to $1.1236, its strongest level since Nov. 9, after dipping to $1.1162 earlier. The euro is weak because of the European Central Bank’s accommodative policy, and that has made German exports cheaper, Merkel told school students in Berlin. The Bloomberg Dollar Spot Index was little changed as of 11.50am in London, after sliding 1.6 per cent last week.
The pound was the worst Group-of-10 performer after the UK threatened to quit Brexit talks unless the European Union drops its demands for a divorce payment as high as 100 billion euros ($112 billion). Sterling weakened against all its major peers also as polls predicted a narrower-than-expected win for Prime Minister Theresa May in June elections.
“The path of least resistance for the euro is higher,” Vasileios Gkionakis, strategist at UniCredit SpA, said in emailed comments. “Economic dynamics are solid, Euro-area political risk premia are priced out and the US administration is a headwind for the dollar.”
Still, the greenback may gain this week, with market focus moving away from the US political turmoil that sent it lower last week as President Donald Trump visits the Middle East, according to Bank of America-Merrill Lynch.
“The dollar was oversold last week,” Athanasios Vamvakidis, head of Group-of-10 currency strategy at the US bank said in emailed comments. “Trump’s trip could lead to some positive headlines, taking attention away from the many negative headlines related to the FBI and Russia last week. We could see some dollar upside this week, but unlikely to be a new trend.”
