Euro makes gains against US dollar as equities rise

The euro strengthened against the US dollar yesterday, finishing the day at $1.3560.

• In early trading yesterday the single currency weakened against the greenback, as investors continued to digest Friday’s much worse-than-expected first quarter eurozone GDP figures. They revealed a 2.5% contraction in the region’s economy for the first three months of 2009.
  
• Interestingly, comments from European Central Bank Governing Council member Axel Weber did little to stem the euro’s decline yesterday morning. He said the ECB had done enough to support the ailing eurozone economy unless the situation got noticeably worse.
  
• However, strong performance from global equity markets yesterday afternoon reversed early losses for the euro, as general risk appetite returned to the market. As a result, investors bought into the “riskier” single currency and sold the safe-haven of the greenback.
  
• The FTSE 100 finished the day up 2.26% at 4446.45, whilst the Dow Jones posted a healthy 2.85% rise to 8268.64. Strength in the banking sector in particular drove these gains.
  
• In trading so far today the euro has resumed its rise against the US dollar, as reduced risk aversion continues to sweep the market.
  
• There are major announcements due in both the eurozone and the US today. In the former, German ZEW Economic Sentiment Survey is out at 10.00 BST, whilst in the latter Building Permit figures are released at 13.30 BST.