Forexpros – The euro remained higher against the U.S. dollar on Tuesday, trading close to a two-week high as market sentiment improved after a successful Spanish government bond sale and amid hopes for fresh action by the European Central Bank.
EUR/USD hit 1.2428 during European afternoon trade, the pair’s highest since August 7; the pair subsequently consolidated at 1.2420, climbing 0.61%.
The pair was likely to find support at 1.2294, Monday’s low and resistance at 1.2537, the high of July 5.
The U.K.’s Telegraph newspaper said earlier that it could confirm weekend reports that the European Central Bank may set a cap on peripheral euro zone bond yields at its next policy meeting in September.
On Monday, the ECB dismissed the reports, saying it was “misleading” to report on decisions which have not yet been taken.
Speculation over the possibility of ECB intervention saw Spanish borrowing costs fall at an auction of short-term government debt, with Madrid successful auctioning EUR4.5 billion of bills, the top end of the target range.
Investors were also eyeing a series of highly anticipated euro zone meetings later this week, amid hopes that leaders would make some progress on steps to the stem the crisis in the region.
Luxemburg’s Prime Minister Jean-Claude Juncker, who also heads the group of euro zone finance ministers, was to hold talks with Greek Prime Minister Antonis Samaras on Wednesday, to discuss a two-year extension of the country’s economic reform program.
German Chancellor Angela Merkel is to meet with French President Francois Hollande on Thursday, while Antonis Samaras is to meet with the French and German leaders later in the week.
Elsewhere, the euro was higher against the pound with EUR/GBP adding 0.31%, to hit 0.7881.
Also Tuesday, official data showed that public sector borrowing rose unexpectedly in July, fuelling concerns over the state of public finances.
The National Statistics Office said that public sector net borrowing posted a surplus of GBP1.8 billion in July, compared to a deficit of GBP12.2 billion in June and disappointing expectations for a surplus of GBP2.5 billion.
Trade looked likely to remain subdued on Tuesday, with no significant economic data releases on the calendar, while volumes were light with many market participants on summer holidays.
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