The euro is strengthening further on Thursday, moving closer to $1.12 as German yields soared due to easing deflation fears. After the German annual inflation accelerated faster than expected, bund yields posted their biggest daily rise in the last two years. As the euro is rebounding, European equities are falling, marking Wednesday as one of the worst sessions to date in 2015. DAX (Germany30) experienced its biggest one-day drop in more than a year, falling more than 3%.
The Reserve Bank of New Zealand kept its interest rate constant at 3.50% on Wednesday. The New Zealand dollar had a sharp drop early on Thursday due to the central bank’s dovish statement, slipping down to 0.75922 against the US dollar. The kiwi’s fall also dragged with it the Australian dollar, which managed, however, to hold most of its earlier gains versus the greenback.
The US dollar dropped to a new nine-week low after the Q1 GDP growth data came out much lower than expected. The greenback managed to recover some of the losses after the Federal Reserve released its monetary policy statement acknowledging the weaknesses in the US economy, indicating however that the slowdown is probably transitory and thus making it more clear that it is not ready for a rate hike yet, at least not until September. The Dollar Index dropped to $94.74 on Wednesday, a low not seen since the end of February.