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Euro hits year-high against US dollar

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The euro extended its run higher versus the US dollar Wednesday, hitting a year-high, following an upbeat outlook on the eurozone economy this week from ECB chief Mario Draghi.

[LONDON] The euro extended its run higher versus the US dollar Wednesday, hitting a year-high, following an upbeat outlook on the eurozone economy this week from ECB chief Mario Draghi.

Meanwhile, the US Republicans' struggle to push through controversial health care legislation was fuelling concerns about the chances of President Donald Trump passing his much-vaunted economic agenda, traders said.

The euro went over US$1.14 at one point, its highest level since a year earlier.

"Wednesday's trading continued to be driven by Tuesday's news, with little to challenge either Draghi's... comments or the latest US healthcare reform stumble for market dominance," said Connor Campbell, analyst at Spreadex trading group.

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"The euro had already managed a strong Tuesday performance after Draghi subtly hinted at a slight shift in the ECB's approach to stimulus. Yet the currency soon received a second wind, hitting a 12-month high against the US dollar following news that the Republicans had pushed back the Senate healthcare vote due to intra-party opposition," he added.

European stock markets were lower in Wednesday trading, mirroring falls across Asia and on Wall Street overnight.

Draghi on Tuesday said the EU was enjoying a newfound confidence that could unlock demand and investment. While he cautioned against winding down the bank's easy money policy, analysts said the Italian was more hawkish than expected.

"We think that the euro's latest rise against the US dollar was a justified reaction to Mario Draghi's hints," analysts at Capital Economics said.

The European single currency was also up against the yen at levels not seen since April 2016, while the US dollar was lower also on concerns about Trump's agenda.

Global stock markets soared in the months after the tycoon's November election victory as traders bet his plans to slash taxes and red tape while ramping up infrastructure spending would fire the world's top economy.

But his failure to pass an overhaul of Obamacare - a key campaign promise - despite his party controlling Congress has led many to question his ability to deliver his major promises.

The president's lack of detail on his economic plans led the International Monetary Fund to cut its 2017 and 2018 US economic growth projections.

"US lawmakers have withdrawn the Senate Health Care Bill till after the summer recess. This is a blow to the Trump agenda because it makes tax cuts all the more difficult," said Greg McKenna, chief market strategist at AxiTrader.

Notable gainers among individual stocks in Europe included Nestle, up 1.1 per cent, after the company said it will buy back 20 billion Swiss francs worth of stock, only days after an activist fund took a stake in the food conglomerate, demanding more returns for shareholders.

"This is an additional step towards speeding up the creation of value for shareholders," said Andreas von Arx, an analyst at Baader Helvea.

Wall Street was firmer in early New York trading, lifted by a strong performance of financials ahead of the result of Federal Reserve stress tests for banks.

AFP

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