Euro in the ascendancy on the back of ECB stimulus

LONDON: The euro climbed to a three-month high on Friday and was set for a third straight week of gains after the European Central Bank expanded its stimulus programme.

The euro rose to $1.1380 against a weakening dollar, its highest level since March 10, and was on course for a weekly jump of 2.5pc and a ninth straight day of gains.

This would represent the euro's longest series of rises on record since October 2004, while the dollar index is on course for its third consecutive week of losses at 96.611, staying near its lowest in nearly three months.

"The euro will keep rallying and move towards $1.20," Peter Chatwell, head of rates at Mizuho Bank, said, adding that the ECB had "dramatically" supported the euro by reducing tail risk.

The ECB raised its emergency bond purchase scheme to 1.35 trillion euros and extended it to mid-2021.

"The rotation out of US dollar generally continued unabated overnight," said Jeffrey Halley, an analyst at OANDA.

Support for the euro was bolstered on Wednesday when Germany launched a 130 billion euro stimulus package after last month supporting a European Union recovery fund that would bring the bloc closer to a fiscal union.

Against the Swiss franc the euro hit a fresh five-month high 1.0864, while the European single currency rose to a 13-month high against the yen at 124.42.

Moves away from so-called safe-haven currencies reflected broad optimism in financial markets as easing coronavirus lockdown restrictions supported economic recovery hopes.

The Australian dollar, often seen as a risk proxy in the currency market, rose 0.8pc to $0.6999, briefly moving above $0.70 for the first time since early January.

"You've got the creeping optimism of the global economy being past the worst and thinking that things are going to be up from here," Commonwealth Bank of Australia analyst Joe Capurso, said, adding this supported "commodity currencies like the Aussie and like the Kiwi".

In the US official employment data due on Friday is expected to show non-farm payrolls fell by 8 million in May, after a record 20.537 million plunge in April.

The US weekly jobless claims report showed the number of Americans filing for benefits dropped below 2 million last week for the first time since mid-March, although that is still three times higher than at their peak during the global financial crisis.

The US unemployment rate is forecast to hit 19.8pc, a post-World War Two record, from 14.7pc in April.