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Euro advances on optimism from Italy, yen leads decline

February 18, 2014

The European common currency advanced against majors on optimism as Italy is set to form a new government, while the yen led the decline. The euro rose after Italian centre-left leader Matteo Renzi has got the green light to form a new government, promising to adopt comprehensive reforms to revitalize Europe's third biggest economy. The ease in political woes from Italy managed to offset the worse than expected drop in German investor confidence. A report released today showed that the index of investor and analyst expectations retreated to 55.7 in February from 61.7 in January, lower than median estimate of 61.5. In the euro area, ZEW survey (expectations) plummeted from a record high of 73.3 to 68.5. The EURJPY surged after the Bank of Japan decided to bolster its lending programs and said it will maintain monetary easing to combat deflation. The pair is currently trading around 140.79 after hitting a peak of 140.84 and a low of 139.48. The EURGBP soared for a second day after a report showing softer-than-expected fall in U.K.'s inflation. Britain's CPI for the year ended January retreated below the BOE's target for the first time since 2009 marking 1.9 percent from 2 percent a month earlier. Versus the dollar, the euro climbed to pull the pair up to 1.3747 after touching a low of 1.3693. The dollar index, which tracks the dollar's movements versus a basket of major currencies, slipped to hover around 80.09.

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Source: Financial Markets

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