The euro advanced 0.33% to $1.229 ahead of the German ten-year debt auction, and after Spanish prime minister Mariano Rajoy announced a series of measures to bring down the country's deficit.
Germany is selling as much as €5 billion of ten-year debt at an auction today and bonds are expected to see strong demand from investors seeking to protect their wealth from the ructions of the eurozone crisis. With China beginning to slow it is possible that European investors will repatriate funds and buy German bonds. These inflows are likely to support the euro. German ten-year yields were at 1.325% at 9.50am (London time).
Meanwhile, the euro benefited from an announcement by Spanish prime minister Mariano Rajoy, who this morning said a series of austerity measures to reduce the country's budget deficit are going to be implemented. He announced €65 billion of cuts and tax hikes over the next two-and-a-half years. EU finance ministers had agreed to give Spain €30 billion by the end of the month, and also provided Spain with an additional year to reach its budget targets. Today's announcement has increased investors' confidence that Spain would honour its obligation.
The euro was little changed after the release of the German consumer price index, which was in line with expectations. Annual inflation grew by 1.7% in June, following a 1.9% rise in the prior month.