Euro near two-year high

The euro is close to reaching its highest point in two years versus the US dollar, as traders feel the Fed is unlikely to taper its stimulus package until next year.

EUR/USD is trading around the $1.38 mark, after yesterday’s weaker-than-expected US jobless claims report brought home to dealers the possibility that the Federal Reserve may not reduce the bond-buying scheme until the first quarter of 2014. The number of people claiming unemployment declined, but not enough to meet the market consensus. The non-farm payrolls report on Tuesday also failed to meet analysts' expectations.

An analyst from the Swiss investment bank UBS stated he believes the euro will reach the $1.41 level in the near term. The recent strength in the euro, reinforced by the fact that now large investment banks are increasing their targets for the currency, has led traders to believe the eurozone has turned a corner.

At 2.55pm (London time), the US will release the University of Michigan consumer sentiment report. Economists are expecting a level of 75.8, and if the report comes in above this estimate we could see traders lock in their profits on the euro.

Spot FX EUR/USD (DFB) chart

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