Euro momentum fades; Aussie rises on stimulus hopes

The euro consolidated gains recorded recently on Tuesday on the back of a raft of negative economic data, while high hopes that key central banks were ready to add more stimulus kept risk currencies such as the Australian dollar at its recent highs.

The single currency was at $1.2260, having fallen back from a three-week high close to $1.2400. Good support is at around $1.2216, a level which represents a retracement of 50 per cent of its rally between 24 and 27 July.

Data published on Monday increased the urgency for policymakers to take action in the near future with economic sentiment across the euro zone dropping to close to a three-year trough as the region’s economy’s slump worsened and businesses’ pessimism deepened.%
Daily FX currency analyst David Song said that there’s mounting hopes that the interest rate decision due from the European Central Bank will be positive and that the bank will continue its non-standard measures to stem the contagion risk.

Against the yen, the euro was at 95.82, falling from a one-and-a-half week high of 97.33 hit on Friday. However, on the Aussie, it fell to a record low of A$1.1646. The Aussie has been one of the best performing currencies recently, largely due to the fact that the Federal Reserve and the ECB are heading closer towards providing further aid to support their economies.