Investing.com - The euro fell to session lows against the dollar on Monday as euro zone bond yields rallied, highlighting the diverging monetary policy stance between the European Central Bank and the Federal Reserve.
EUR/USD was down 0.21% to 1.3613, still some way from the four-month trough of 1.3502 reached last Thursday.
The pair was likely to find support at 1.3585 and resistance at 1.3676, Friday’s high and a two-week high.
Borrowing costs in the euro zone fell to fresh record lows on Monday, as market sentiment was boosted by the European Central Bank’s decision last week to launch a package of measures to avert the threat of persistently low inflation in the euro area.
The yield on Spain’s 10-year bonds fell to 2.6% on Monday, falling below their U.S. equivalent which was yielding 2.61%. The yield on Ireland’s 10-year bonds fell to a euro-era record low of 2.61% while the yield on German 10-year bonds fell to the lowest against their U.S. counterpart since 2005.
The ECB cut the main refinancing rate in the euro area to a record low 0.15% and imposed negative deposit rates on commercial lenders, in a bid to stimulate lending to businesses. ECB President Mario Draghi also outlined a new long-term loan program for banks to promote lending to small and mid-sized businesses and kept the option of quantitative easing on the table.
In contrast, the Fed is expected to start tightening monetary policy in the first half of next year, after its stimulus program winds up later this year.
Friday’s nonfarm payrolls report showed that the U.S. economy added jobs for the fourth successive month in May, with employment returning to its pre-recession peak.
Elsewhere Monday, data showed that euro zone investor confidence deteriorated unexpectedly in June, despite the ECB’s new measures to support growth and inflation.
The Sentix investor confidence index fell to 8.5 this month from 12.8 in May, compared to expectations for an uptick to 13.2.
Trading conditions remained light due to the Whit Monday holiday in some parts of Europe.
The euro also fell to session lows against the yen and the pound, with EUR/JPY dropping 0.30% to 139.44 and EUR/GBP down 0.27% to 0.8099.