A positive Italian bond auction sent the euro surging to an intraday high of $1.316 by around 11am in London.
Italy successfully sold its full target of €11 billion at a bond auction today. The treasury managed to sell €8 billion of six-month bills at an average yield of 1.97% and a further €3 billion of one-year bills at a rate of 2.214%. The drop in yields suggests that investors are becoming more confident about Italy's ability to get its finances back in top shape – perhaps positive remarks about Italian debt from billionaire investor Bill Gross yesterday contributed to today's success. Elsewhere, the yield on the ten-year Spanish bond fell below 5% for the first time since October, despite Spanish unemployment rising to a 15-year high of 22.9%.
The euro fell back in afternoon trading after US GDP grew less than forecast. The American economy expanded at an annualised rate of 2.8% in the fourth quarter, less than forecasts of 3%. The weak reading encouraged investors to reduce their exposure to risky assets, knocking EUR/USD down to $1.31.
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