The euro strengthened against majors yesterday. Relatively smooth Italy’s debt auction helped the single currency overcome the level 1.31 against the US counterpart and reduce concerns about financial stability of the third largest euro area’s economy. Despite Italy’s government bond yields rose yesterday to a 4-month high, a strong demand from national investors made risks relatively balanced. The government managed to raise 4 billion euros at the auction of 10-year papers with a yield of 4.83%. 2.5 billions euros were raised at a sale of 5-year papers with a yield of 3.59% against 2.94% a month ago.
Technically speaking the pair successfully held its ground above important support level at 1.30. A move below that level could become an additional signal to go short. We consider that in the medium term the whole set of risks in the euro area will keep weighting on the single currency.
In Japan the government named the next central bank governor. President of the Asian Development Bank Haruhiko Kuroda is expected to govern the Bank of Japan after his candidacy is approved by the parliament. Kuroda is considered well-known supporter of aggressive monetary expansion. Therefore in April, when the central bank will hold its first meetings with a new head, we may finally see what instruments the Bank will use to stimulate the economy and beat deflation. The Japanese yen didn’t show strong reaction to the news, as markets already expected Kuroda’s nomination. However both the US dollar and the euro are traded at some distance from previously settled monthly lows.
