Euro rallies as gold prices stabilise

The yen has dropped against the euro and the US dollar as investor anxiety eased following the recent dramatic fall in gold prices. A fall in US factory output along with lower consumer prices has fuelled predictions that the US Federal Reserve will continue with its policy of monetary stimulus.

Forex.com senior currency strategist, Eric Viloria, said recent CPI data indicated that the Fed would continue with quantitative easing adding that this was one of the main reasons for market support and why the dollar remained weak.

A Group of 20 meeting will begin in Washington on Thursday where central bankers and finance ministers will discuss the financial and economic markets including the crisis in Cyprus and asset price reactions.

The euro is currently at its highest level against the dollar for seven weeks. Investors appear to be paying little attention to a recent drop in German investor sentiment. The euro is currently trading at $1.3184, a rise of 1.1 per cent against the greenback.

Gold appears to be stabilising after a record drop, although the markets remain jittery following the bombings on Monday at the Boston Marathon. Stock prices are also more stable as the general opinion is that the bombings were an isolated incident.