Euro Advances On Risk Appetite

Euro Advances On Risk Appetite


In the European session on Friday, the euro climbed against most major currencies as traders bet on high-yielding assets in response to Spain's announcement of austerity budget that may enable to secure a bailout from international creditors.
The Spanish government unveiled yesterday a tight 2013 budget focused on cutting spending rather than tax hikes aimed at reviving the country's sagging economy.
Under the new budget, government ministries will have their budgets slashed by 8.9 percent in 2013, while public spending will be cut by 58 percent overall. The new reforms are crucial for Spain to access a bailout under the European Central Bank's recently announced OMT programme.
Investor focus now turn towards Spanish bank stress tests due later in the day.
Sentiment also got a lift after Greek political leaders reached agreement on a nearly 12-billion-euro package of spending cuts and tax increases demanded by international creditors in exchange for two major bailouts.
Meanwhile, the French government will likely forecast an increase in public debt to 91.3 percent of gross domestic product in 2013 in its annual budget to be unveiled on Friday, though the budget deficit is tipped fall back to 3 percent of GDP as planned, French daily Les Echos reported Thursday without naming sources.
This is slightly higher than 90.6 percent of GDP forecast previously and includes French contribution to the Eurozone bailout funds, the daily said. Debt is seen at 89.9 percent of GDP at end-2012.
Data released by the Federal Statistical Office showed that Germany's retail sales decreased at a slower pace in August, and the rate of decline was lower than economists expected.
Retail sales turnover, in real terms, decreased 0.8 percent on an annual basis in August, a tad slower than the 0.9 percent fall economists had forecast. The latest contraction was also weaker than 1.6 percent seen in July.
The euro climbed to a 3-day high of 1.2945 against the U.S. dollar, compared to yesterday's close of 1.2914. The next upside target level for the euro is seen at 1.30.
Against the British currency, the euro that closed yesterday's deals at 0.7955 approached 0.7973, its highest level in 2 days. If the euro rises further, it may breach 0.80 level.
The euro also firmed against the yen, advancing to a 2-day high of 100.44. On the upside, the euro is likely to break 101.00 level. The pair ended Thursday's deals at 100.22.
Industrial output in Japan contracted a seasonally adjusted 1.3 percent on month in August, the Ministry of Economy, Trade and Industry said in Friday's preliminary reading.
On a yearly basis, industrial production fell 4.3 percent - again shy of expectations for a decline of 3.4 percent following the 0.8 percent contraction in the previous month
A separate data showed that retail sales in Japan were up 1.8 percent on month in August, worth 11.141 trillion yen.
The European single currency edged up to 1.2386 against the Australian dollar with 1.24 seen as the next resistance level. At yesterday's close, the euro-aussie pair traded at 1.2370.
Looking ahead, Eurozone flash inflation figures are due shortly.
The U.S. Personal income and spending for August, Chicago PMI and the University of Michigan confidence-both for September are the major releases in the North American session.