The euro moved higher vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3470 level and was supported around the US$ 1.3250 level. The common currency darted higher for a couple of reasons. First, traders have been already discounting the anticipated results of today€™s U.S. banks€™ stress tests results. The common perception among market participants is that between seven and ten U.S. banks will be commanded to submit new capital raising plans to the U.S. Treasury by 8 June. Citigroup, Bank of America, and Wells Fargo are the names most dealers associate with being undercapitalized ahead of the stress test results. It is expected that banks will be asked to raise at least an additional US$ 65 billion in capital. Second, the euro moved higher after the European Central Bank reported plans to purchase covered bonds in the market, its first foray into quantiative easing. The ECB also reduced its main refinancing rate target by 25bps to 1.00%. Traders reacted optimistically to the ECB€™s plans on expectations that the global economic outlook is improving. Data released in the U.S. today saw Q1 non-farm productivity climb 1.1% q/q and 1/1% y/y while unit labour costs were up 2.9% q/q and 2.9% y/y. Also, weekly initial jobless claims were off 34,000 to 601,000, their lowest level since January, while continuing jobless claims rose 56,000 to 6.351 million, the highest level since at least 1967. In eurozone news, German March manufacturing orders were up 3.3% m/m but they were off 26.7% y/y. Euro bids are cited around the US$ 1.2765 level.
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