Euro spikes as German and Italian bond yields spread

The euro rose against key currencies as investors focused on the widening gap between German and Italian bonds. The spread between the 10-year bonds of the two countries rose to 2.007%, which was its highest level since May 2020. This means that investors have a preference for safer German government bonds. It also signals that there are expectations that the European Central Bank will start hiking interest rates in its July meeting. The hawkish state of the ECB comes at a time when there are worries about stagflation in the region as inflation rises to over 7%.

Global stocks continued crashing on Friday as the mood in the market deteriorated following the hawkish Federal Reserve decision. In the United States, futures tied to the Dow Jones declined by 170 points while those linked to the Nasdaq 100 fell by 150 points. The two indices declined by 1,100 and 600 points on Thursday. The same trend happened in Europe where the DAX, CAC, and Stoxx dropped by more than 1.50%. The worry is that major central banks like the Fed, BOE and the ECB will accelerate their tightening process soon. Also, while most companies have reported strong revenue growth, their margins have dropped.

The US dollar continued its strong rally as investors reacted to the latest non-farm payroll data. Data by the Bureau of Labor Statistics (BLS) showed that the economy added more than 428k jobs in April. This increase was better than the median estimate of 391k. Further numbers revealed that the unemployment remained at 3.6% while wages continued growing. Elsewhere, in Canada, the economy added just 15k jobs in April while its unemployment rate declined to 5.2%.

XBR/USD

The XBRUSD pair continued rising after the OPEC+ meeting. It managed to move above 112 for the first time in weeks. It has moved above the 25-day moving averages while the DeMarker indicator has moved above the overbought level. The pair has moved above the descending trendline that is shown in orange. Therefore, the pair will likely keep rising as bulls target the key resistance level at 114.17.

EUR/USD

The EURUSD pair tilted upwards as EU bond spreads widened. The pair rose to a high of 1.0582, which was higher than this week’s low of 1.0480. It has moved between the middle and upper side of the Bollinger Bands. Also, it has risen above the 25-day moving average while the Relative Strength Index has been rising and has managed to move above 50. The pair will likely retest the resistance at 1.0650.

ETH/USD

The ETHUSD pair made a strong bearish breakout in the past few days. It managed to move below the important support level at 2,700. It also declined below the envelopes and moving average indicators. Further, the pair’s MACD has moved below the neutral level while the Relative Strength Index (RSI) has moved slightly below the overbought level. Therefore, the pair will likely keep falling as bears target the next key support at 2,500.