Euro hits two-month high

The euro hit a two-month high on Wednesday and the US dollar fell against the yen after the Federal Reserve's minutes of its last meeting showed policy makers were concerned the US recovery may be slowing. The Federal Open Market Committee minutes weighed on the greenback which had fallen earlier in the day after data showed US retail sales declined for a second straight month.
Fed officials revised down slightly their outlook for economic growth in the second half of the year, while the minutes said the committee would need to consider whether "further policy stimulus might become appropriate if the outlook were to worsen appreciably."
Earlier in the session the dollar slipped after a weak June retail sales report which followed data on Tuesday showing a wider US trade deficit in May. The greenback slid 0.5 percent to 88.27 yen. Meanwhile, the European currency hit $1.2778, its highest since early May.
The euro pared some of its gains after the Fed minutes but was still above a session low of $1.2683 hit earlier on lingering concern about some eurozone countries' debt woes. However, recent successful bond auctions in Portugal, Germany and Greece have eased some concerns.
Sterling soared to a 10-week high as better-than-expected UK employment data added to speculation the Bank of England may have to start thinking about raising interest rates. Sterling rose 0.5 percent to $1.5256 after earlier hitting its highest level since May after better-than-expected employment data. While US data has been on the soft side, US second quarter corporate earnings have been surprisingly strong so far, and that's also helped risk appetite lately.
The next target for euro/dollar was the $1.30 area, said Roberto Mialich, currency strategist at Unicredit in Milan. Others said the next target was at $1.2780, the 50 percent retracement of the euro's fall from mid-April to the June low. With the US 10-year Treasury yielding barely more than 3.0 percent, traders also cited a growing demand for higher-yielding assets and growth-related currencies.