Forex - Euro up after ECB stress test results on banks

Investing.com - The euro gained in early Asian trade on Monday after the results of stress tests on European banks were released at the weekend, showing a better than expected picture of financial health for many.

EUR/USD traded at 1.2674, up 0.04%. JPY/USD traded at 108.23, up 0.07%, while AUD/USD changed hands at 0.8805, up 0.15%.

Roughly one in five of the euro zone's top lenders failed landmark health checks at the end of last year but most have since repaired their finances, the European Central Bank said on Sunday.

Painting a brighter picture than had been expected, the ECB found the biggest problems in Italy, Cyprus and Greece but concluded that banks' capital holes had since chiefly been plugged, leaving only a modest 10 billion euros ($12.7 billion) to be raised.

Italy faces the biggest challenge with nine of its banks falling short and two still needing to raise funds.

The test, designed to mark a clean start before the ECB takes on supervision of the banks next month, said Banca Monte Dei Paschi Spa (OTC:BMDPY) had the largest capital hole to fill at 2.1 billion euros.

In Japan, the September service producer price index is due at 0850 Tokyo time (2350 GMT) with a previous reading of 60.7%.

At 1800 in Sydney (0700 GMT), the RBA's Finance Stability Head Luci Ellis participates in a panel discussion at the Australian Housing and Urban Research Insitute Roundtable.

Last week, the euro pushed higher against the dollar on Friday after data showed that German consumer confidence improved, while upbeat U.K. third quarter growth data underpinned investor demand for the pound.

The euro found support after the forward looking Gfk index of German consumer climate ticked up to 8.5 for November from a revised 8.4 in October. The index had fallen sharply in the preceding two months as concerns over geopolitical risks and the ensuing economic slowdown weighed.

Concerns over a confirmed Ebola diagnosis in New York City last week bolstered safe haven demand for the yen and saw the dollar weaken slightly.

The US dollar index, which tracks the performance of the greenback against a basket of six major currencies, was down 0.19% to 85.79 late Friday. The index still ended the week higher, stabilizing following a steep selloff in the previous week.

Fears that a slowdown in global economic growth could act as a drag on the U.S. economic recovery have prompted investors to push back expectations for an increase in interest rates by the Federal Reserve to the second half of 2015.

In the week ahead investors will be looking ahead to the outcome of Wednesday’s Federal Reserve meeting amid expectations that it will wind up its asset purchase program.

Investors will be scrutinizing the Fed statement for further indications on how soon interest rates could start to rise.

Friday’s report on euro zone consumer inflation will also be in focus, amid growing expectations that the European Central Bank will have to take additional easing steps to boost the flagging euro area economy.

On Monday, the Ifo Institute is to release its report on German business climate. The euro zone is to release data on M3 money supply and private loans.

The U.K. is to release private sector data on retail sales.

The U.S. is to publish an industry report on pending home sales.