Investing.com - The euro exploded higher by over 1% against the U.S. dollar Tuesday, as European Central Bank intervention speculation sparked the risk on trade.
EUR/USD hit 1.2473 during U.S. trade, the pair’s highest since July 5; the pair subsequently consolidated at 1.2470, surging1.02%.
The pair was likely to find support at 1.2341, the session low and resistance at 1.2537, the high of July 5.
The single currency strengthened broadly after a report in the U.K.’s Telegraph newspaper said it could confirm weekend reports that the ECB may set a cap on peripheral euro zone bond yields at its next policy meeting in September, beyond which its bond buying program would kick in.
On Monday, the ECB dismissed the reports, saying it was “misleading” to report on decisions which have not yet been taken.
Speculation over prospects for action by the ECB saw Spanish borrowing costs fall at an auction of short-term government debt earlier, with Madrid successful auctioning EUR4.5 billion of bills, the top end of the target range.
Meanwhile, investors were looking ahead to a series of euro zone meetings later in the week, amid hopes that leaders would make some progress on steps to the stem the crisis in the region.
Luxemburg’s Prime Minister Jean-Claude Juncker, who also heads the group of euro zone finance ministers, was to hold talks with Greek Prime Minister Antonis Samaras on Wednesday, to discuss a two-year extension of the country’s economic reform program.
German Chancellor Angela Merkel was to meet with French President Francois Hollande on Thursday, while Antonis Samaras was to meet with the French and German leaders later in the week.
The euro hit a two-week high against the pound, with EUR/GBP advancing 0.57% to 0.7901 and climbed to a more than six-week high against the yen, with EUR/JPY jumping 0.92% to 98.95.
Market participants were looking ahead to the minutes of the Federal Reserve’s August policy meeting on Wednesday, amid speculation over how close the U.S. central bank may be to implementing another round of stimulus measures.