September 5, 2014 / 12:25 PM / 3 years ago

RPT-GLOBAL MARKETS-Euro heads for longest losing streak after ECB's move

4 Min Read

(Repeats to add named item code)
    * Euro skids as ECB cuts rates, plans asset-buying spree
    * European shares retreat on profit taking, focus on U.S.
    * Euro zone bond yields continue to fall

    By Atul Prakash
    LONDON, Sept 5 (Reuters) - The euro hovered near a 14-month
low on Friday and headed for its longest weekly losing streak
against the dollar in its history after the European Central
Bank's surprise move to cut rates and embarking on a
trillion-euro asset-buying binge.
    The euro was almost flat at $1.2950 after plummeting
1.6 percent on Thursday, its steepest fall in almost three
years, despite upbeat data from Germany, showing industrial
output in the euro zone's biggest economy increased by the most
in almost 2-1/2 years in July.
    The common currency stayed firmly below the significant
$1.30 level, leaving the euro well on track for eight straight
week of losses - the first time that has happened since its
introduction in January 1999. 
    "If the primary reason for the ECB deposit rate cut
yesterday was to weaken the euro, it has been successful," said
Chris Turner, a strategist with Dutch bank ING in London.
    The impact of the ECB's bold moves was also reflected in the
bond market. The rate cut sent short-term bond yields into
negative territory in Germany, France, the Netherlands and
Austria, giving investors an overwhelming incentive to sell
euros for higher-yielding assets elsewhere.
    Spanish and Italian 10-year
yields fell 5 to 7 basis points to 2.11 percent and 2.31 percent
respectively. Italy's hit a new record low of 2.28 percent
earlier in the day.
    "The main beneficiaries are the peripheral markets and I
still think there is scope for spreads to narrow over Bunds,
particularly in Spain," said Nick Stamenkovic, bond strategist
at RIA Capital Markets.
    "People are still searching for yield. While the ECB
underpins the short end of the curve, investors are going to
look to extend duration."
    European shares, however, retreated from multi-year highs
scaled after the ECB rate cut, with investors taking some
profits ahead of market-sensitive U.S. non-farm payrolls data.
    The FTSEurofirst 300 index of top European shares
was down 0.6 percent, retreating from a 6-1/2 year high, but
still set to record its fourth consecutive weekly gain.
    Investors keenly waited for the latest read on the U.S.
labour market at 1230 GMT. Analysts expect the pace of job
creation to have picked up slightly in August, with a rise of
225,000 jobs on non-farm payrolls. 
    "If we get a strong U.S. payrolls number this afternoon, and
I suspect we will, as well as a mild pick-up in wage growth 
that will give the dollar a further lift going into the start of
next week," Kit Juckes, macro strategist at Societe Generale,
    "There's a reasonably high chance, despite the market
positioning, that we try to push the euro down even further
    With the U.S. dollar flying, commodities had to cheapen to
stay attractive and gold struck a three-month low at 
$1,256.90 an ounce before clambering back to $1,265. Brent crude
oil was 0.1 percent higher after shedding more than a
dollar overnight.
    Markets were also eyeing whether or not the United States
and Europe pushed ahead with plans for new sanctions on Russia
at a NATO meeting in Wales.
    Ukrainian President Petro Poroshenko and the main
pro-Russian rebel leader said they would both order ceasefires
on Friday, provided that an agreement is signed on a new peace
plan to end the five-month war in Ukraine's east.

 (Additional reporting by Jemima Kelly, Marc Jones and Marius
Zaharia in London and Wayne Cole in Sydney; Editing by Ruth

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