The EUR/USD rallied higher, extending its gains from yesterday following a pull back in overnight trading to the 1.2175 area. US stocks were up strongly, with the Dow Jones Index up triple digits in the first half of trading.
US data was supportive of growth and loose monetary policy as a regional manufacturing index climbed to 19.6 from 19.1 in May and US import prices fell 0.6% in May suggesting the Fed has scope to keep interest rates low for longer.
However, the rally in the Euro seems more based on the idea that the panic in the euro-zone is abating, with countries like Spain and Ireland able to successfully tap the credit markets. Even a downgrade to Greece from Moody's only caused a small pull back to the rally, a piece of news that would have sent stocks and the Euro reeling just a month or two ago. The rise in the Euro was probably a factor in US stocks climbing as it shows that the euro-zone may have weathered the storm.
Then again, the recent rally may be a technical correction the huge falls we saw in the pair the previous two months. In any event, the pair reached the 1.2335 area around noon NY time, the highest the pair has been since June 1st.