Euro lower as bond yields rise

The euro is off versus the US dollar this morning, as the political uncertainty in Portugal pushes bond yields higher.

Political parties in Portugal today begin talks to put in place a ‘national salvation pact’ which was called for by President Anibal Cavaco Silva last week. Uncertainty in the country has pushed up the cost of borrowing for the government to above the 7% level. The country received a bailout from the Troika over two years ago and had hoped to exit the bailout scheme this year, but that is looking unlikely given the sudden spike in their bond yields. This news spooked traders and the euro is trading at $1.3022, down 0.3% against the dollar on the day.

We are expecting a raft of economic data from the US later on; at 1.30pm (London time) retail sales and empire state manufacturing will be released, followed by business inventories at 3pm. If these economic updates are positive we could see the euro drop below the $1.3 mark, as it could lead the Federal Reserve to look to taper their stimulus package towards the end of the year.

Spot FX EUR/USD chart

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