The shared European currency extended its previous gains and hit an intraday high, driven mostly by market sentiment, while German trade figures had a minor effect on the EUR/USD.
Frankfurt – The euro hovered near daily highs ahead of the market open on Wednesday, driven primarily by the broad market sentiment that had switched to a risk-off mood due to persistent weakness in oil prices.
“With iron ore prices and oil prices both falling to multi year lows below $40 it isslowly becoming apparent that what appeared to be a little local difficulty has all the potential to be a perfect storm for the commodities complex,” Michael Hewson from CMC Markets UK wrote on Wednesday.
The euro was seen firmly higher, rising 0.27% to $1.0920, after hitting its daily high of $1.0928 earlier.
Wednesday’s European calendar offered little data and therefore little capability to add bolder stimulus for the currency pair. Germany reported its latest trade figures on Wednesday, with thelatest import and export data for October.
Germany’s trade surplus shrank in October, but was still higher than expected. Both exports and imports declined more than expected. Exports fell 1.2%, down from a 2.6% rise in the previous month, more than the 0.6% fall that had been expected. Imports also fell, 3.4% compared to a revised rise of 3.8% seen in the previous month, but much more than expectations of a 1.0% fall.
Moreover, European Central Bank (ECB) Executive Board member Sabine Lautenschlaeger will speak at the 11th High-Level Meeting in Abu Dhabi, United Arab Emirates, while ECB Governing Council member Ewald Nowotny will speak in Vienna.
The main theme, however, is the ongoing weakness in oil prices. With no sign that OPEC will reach an agreement at the next meeting scheduled for mid-2016, “it’s become a bar room brawl with Saudi Arabia and Iran the main protagonists with the rest of the cartel caught in the cross fire, while non OPEC members look on,” Hewson further said.
“In an environment where both Brent and WTI oil are trading below US$40 a barrel, the debt-laden and marginal energy players are increasingly likely to be pushed to the verge of bankruptcy,” Angus Nicholson from IG also wrote on Wednesday.