Forex traders found the euro was heading for its biggest drop in four months in the week ending 8th February, mainly due to ongoing debate between Italy and the EU regarding Italian budget plans.
Eventually, the euro managed to consolidate its position to a two week low, with large buying orders at the $1.13 mark providing essential support.
Forex Trading News Last Week
With China celebrating its new year holiday during the week, the yuan also dropped after concerns were expressed about economic growth in the country.
Experts had expected that the US dollar would weaken in 2019 against both the euro and the Japanese yen, but this hasn’t proved the case so far.Indeed, the dollar has gained over 1% against euro prices and stayed flat against the yen.
With economic worries impacting a number of European countries, the EC reduced both inflation and growth forecasts on Thursday 7th February.Both Germany and Spain have expressed concerns about an economic downturn.
No Appetite To Sell Euro
Despite the poor news on the euro, it seems traders were reluctant to sell it below the $1.13 mark and a mystery buyer managed to ensure its price strengthened from a low of $1.1323 on Thursday to reach a level of $1.1338 by the end of the day.It stayed at this level throughout 8th February.
One leading analyst said that large currency options totalling almost $1bn at a rate of around $1.1280 expiring late on Thursday 7th February may have been the prop which caused the currency to maintain its levels.
Other traders commented that banks had tried to curb euro volatility.
Dollar Strength Remains
Philip Wee is a currency strategist at DBS and considers it highly likely that the euro will drop to below $1.10 later in 2019.