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Euro extends gains
The euro is higher versus the US dollar after the disappointing GDP figures from the US yesterday.
It has been a tough two weeks for the euro as speculation is growing that the European Central Bank will introduce measures to tackle deflation next week. Yesterday’s larger-than-expected contraction in the US growth gave traders the signal to go long on the euro.
This morning, Italy revealed a small drop in its consumer price index for May. There was a small reaction to the news from traders, but this is additional proof that indebted eurozone nations are struggling with deflation.
At 2.45pm (London time), the US will announce the Chicago purchasing managers index report. The expectation is for a reading of 60.8, and if the report is strong the euro could drop below the $1.36 mark. Even if the report is soft the euro will still find it difficult to retrace the recent high of $1.3660.