Forex – EUR/USD higher in early U.S. trade

Forexpros – The euro moved higher against the U.S. dollar in early trade Friday, as Italy’s Senate passed a package of austerity measures, paving the way for a new government and raising hopes for progress on tackling the country’s debt threat.

EUR/USD hit 1.3704 in early U.S. trade, the pair’s highest since Wednesday; the pair subsequently consolidated at 1.3686 rising 0.56%.

The pair was likely to find support at 1.3522, Wednesday’s low, and resistance at 1.3859, Wednesday’s high.

The Italian Senate approved, by a vote of 156 to 12, to approve the budget-cutting measures promised to the European Union in exchange for assistance in reining in the country’s national debt of USD2.6 trillion.

Yields on Italy’s 10-year bonds fell for the second day after rising to record levels earlier in the week, nearing the 7% threshold that prompted Ireland, Portugal and Greece to seek bailouts.

Passage of the measure was expected to be a precursor to the appointment of former European Union commissioner and economist Mario Monti to succeed outgoing Prime Minister Silvio Berlusconi.

Meanwhile in the U.S., the University of Michigan reported Friday that its Consumer Sentiment Index rose more than expected to 64.2 in November, up from 60.9 the previous month.

The University’s index is based on a survey of approximately 500 consumers and rates the relative level of current and future economic conditions in the U.S. Economists had forecast the index to rise to 60.1 for the period.

Wall Street shares jumped on the news from Italy, on pace for their fourth gain in five sessions; The Dow Jones Industrial Average rose 2% to 12,135.29, the Nasdaq Composite Index added 1.62% to 2,667.33 and the S&P 500 gained 1.88% to trade at 1,263.15.

In afternoon trade, European shares rallied on hopes that Italy would avoid succumbing to regional debt contagion, with France’s CAC leaping 2.48% to 3,140.84, Britain’s FTSE 100 advanced 1.55% to 5,529.21, while Germany’s DAX surged 2.88% to 6,036.62.

Meanwhile, the euro was lower against the British pound but up against the Japanese yen, with EUR/GBP down 0.02% to hit 0.8537, and EUR/JPY higher by 0.18% to hit 105.85.

Eurostat was due to release monthly figures on industrial production in the euro-zone on Monday.