The euro rose 0.5% against the US dollar to $1.3525, as investors unwound bearish deals against the embattled currency ahead of the weekend.
The euro has also benefited from rumours about ECB intervention and talk of further Quantitative Easing (QE) by the Federal Reserve. Unidentified sources informed Bloomberg News that the ECB bought Spanish and Italian government bonds today to help stabilise yields, leading the market to speculate that the ECB is preparing to tackle the region’s sovereign debt crisis with more force. In the meantime, William Dudley, the Fed Bank of New York president, said on Thursday the central bank may do more to boost the US economy, while separate officials argued that the Fed may have to do more QE to help replenish liquidity levels. On 2 November Fed chairman Ben Bernanke said that additional stimulus ‘remains on the table’. Signs of progress in Italy and Greece may have also helped the euro.
ECB President Mario Draghi today called on Italian politicians to accelerate the implementation of agreed reforms of the region’s rescue fund, while the new government in Greece approved a final 2012 budget that aims to reduce the beleaguered country’s deficit and restore confidence. From a technical perspective, the trend for the euro remains bearish, as confirmed by the standard Moving Average Convergence Divergence indicator. However, it should be noted that if the euro manages to breach the 50-day moving average of $1.3670, then a possible rise to $1.3850 could be possible in the short term.