"The euro rally has continued today despite more stable German bond markets, suggesting the move is being driven by a weaker dollar," Barclays wrote in a note on Thursday.
"European equities are broadly stable but the downtrend that started in mid-April remains in place."
The euro was at $1.1430 - two-thirds of one percent on the
day higher - as the U.S.-German 10-year yield spread narrowed to a
three-month low of 151 basis points. The dollar's yield
advantage over the euro was 193 basis points in mid-March, Reuters says.
This sent the dollar index to four-month trough, as it was down 0.52% to 93.25, the lowest level since January.
While the data indicating strong euro zone economic growth in the first quarter supported the euro, it contrasted with disappointingly weak U.S. retail sales in April. The U.S. Commerce Department said on Wednesday that retail sales were unchanged, compared to expectations for a 0.2% increase.
Although the weak U.S. data also added to speculation that the Fed will delay its rate lifting, it failed to reverse bond selling.
The rise in yields kept global share markets quiet, as it has made equities look more expensive in comparison to debt. The yield on German 10-year bund climbed as high as 0.778 percent, closing in on the 2015 high of 0.799
percent touched last week. It was last at 0.762 percent, still up on the
day.
The 10-year Treasury yield was flat on the day at 2.29 percent, notably slightly above Wednesday's five-month closing high of 2.28 percent.
While bond and forex movements are likely to be the main
market driver on Thursday, market players will also eye
talks between Greece and its creditors, as well as await a speech to the International Monetary Fund by ECB President Mario Draghi due later in the day.
