Euro holds firm; NAFTA worries hit Canadian dollar, Mexican peso

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The euro held firm on Wednesday as investors started to focus on the European Central Bank’s policy meeting next week, while concerns that the United States could pull out of its trade agreement with Canada and Mexico hit their currencies.

The euro traded at $1.1719 EUR=, having gained about 0.5 percent so far this week and hovering about two cents above its 10-month low of $1.1510 set on May 29.

Market players said the euro got a boost on Tuesday after Bloomberg, citing sources, reported that the ECB could conclude its next policy meeting this month with a public announcement on when its quantitative easing program would end.

Many traders have thought the ECB would seek to avoid causing a ripple at its next policy meeting on June 14 given the uncertainty caused by the Italian political situation.

The report followed a speech by Italy’s new Prime Minister Giuseppe Conte, whose promise of radical change had mixed blessings for the euro.

While his reassurance that leaving the euro was not on his agenda helped to underpin the common currency, the new government’s tax cuts and higher welfare spending plan lifted Italian bond yields, undermining investor confidence.

“The market will start to focus on the ECB from now on. Politics in Italy and Spain will play second fiddle as we now have new governments in both countries,” said Kazushige Kaida, head of foreign exchange at State Street Bank.

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