Euro Fails to Hold On to Gains on Resurgent US Dollar Demand

The euro today rallied to new highs in the early European session even as German bond yields hit new tops and the US dollar retreated. However, the EUR/USD currency pair proceeded to give up all its gains as the greenback rebounded amid rising US bond yields and Irish border concerns.
The EUR/USD currency pair today rallied to a high of 1.1715 before retracing all its gains to fall to a low of 1.1649 in the early American session.
The currency pair’s initial rally was triggered by the rise in German 10-year yields to hit a 3-month high above 0.50%, which was a gain of 2.70%. The rally was largely due to today’s sale of €3 billion long-term German debt. Another trigger for the rally was the investor fears regarding the US-China trade war, which caused the US Dollar Index to hit a 7-week low of 94.32. The pair started declining as the buying pressure on the greenback increased and the DXY recovered. A speech by Mario Draghi in Berlin later in the session failed to stimulate the euro’s recovery.
The emergence of negative news headlines involving Michel Barnier and the UK Prime Minister regarding the Irish border also weakened the euro. The release of the positive US current account data, which showed that the trade deficit dropped 17% in Q2 also boosted the greenback.
The pair’s future performance is likely to be affected by tomorrow’s EU Heads of State meeting and multiple US macro releases.
The EUR/USD currency pair was trading at 1.1685 as at 15:45 GMT having dropped from a high of 1.1715. The EUR/JPY currency pair was trading at 131.11 having declined from a high of 131.68.

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