Euro Recovers From Its 17-Month Low As The Dollar Weakens

The Euro's rebound from its 17-month low came from the Dollar side, because the euro area's own news on Thursday was bad. EUR/USD climbed to just short of 1.1250, its highest since October 9, and hasn't been back there since, dipping just under 1.1200 on the US releases and recovering above it.

EUR/USD made that high on a report that China may be holding US government bonds through custodian banks in Canada. Canada's reported holdings of US debt have climbed to nearly $600 billion through a tariff fight with Washington. The 10-year Treasury yield fell toward 5.1% as the report spread, and the Euro gained more than the Pound on it, with EUR/GBP at its high for Thursday.

Euro area factory output fell 0.5% in August against a flat forecast, its third straight drop, and July was revised down to a 0.3% fall. European Central Bank (ECB) President Lagarde said on Wednesday that France's debt fix lies at home, and on Thursday France paid 4.16% to borrow for five years, up from 3.92%. EUR/USD was higher after both releases than before them.

On the calendar

Bundesbank President Nagel briefs reporters in Bangkok with German Finance Minister Klingbeil at 02:30 GMT on Friday. Final euro area inflation for September follows at 09:00 GMT, and the core rate is forecast unchanged at 2.5%. The ECB's deposit rate is 2.50% after hikes in June and September, and traders expect a hold on October 29 and a hike in December, the decision those figures feed.

Euro area Purchasing Managers Index (PMI) surveys are due at 08:00 GMT on Friday, October 23, after a composite 53.1, with US PMIs at 13:45 GMT the same day. Both sides of EUR/USD get their October business figures on the same Friday, six days before the ECB decides.

On the charts

Wednesday's dip below the 1.1150-1.1300 range EUR/USD had held since October 2 was gone by the end of that day's bar. The pair is trading near the midpoint of that range again. The climb from Wednesday's low is the biggest rebound of the slide that started just above 1.1700 on August 21, a fall of more than 5%.