The euro surged over the USD1.16 level this afternoon, hitting heights not seen since January 1999 after US Treasury Secretary Paul Snow acknowledged the benefits of a weaker greenback. But late profit takers shaved gains and at 1745, the single currency stood at USD1.1555, while against sterling it was also off early highs at STG0.7181. Dealers said that while it was possible euro/dollar could hit USD1.17 in the near term, it would likely be seen as overbought at that level, and would return to current valuations.
Tomorrow's US trade figures will be watched closely and are seen dictating euro/dollar direction on the day. A wider trade deficit in March could highlight the record US current account gap, and the dependence on foreign capital inflows to finance it. A weaker dollar could also facilitate US exports, which would cut the deficit as well as being welcomed by under pressure manufacturers. Sterling has also found continued support, although its own decline against the single currency is also set to continue, analysts agreed. //www.fxcentre.com