Forex Europe Review – Euro lifted by talks of creating common euro bonds

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Euro pared losses against the dollar after being given a boost by comments from European Commissioner Jose Manuel Barroso on options for the introduction of common euro zone bonds will soon be presented in an effort to solve the region’s debt crisis. Despite German opposition to the idea, many investors see this as a positive as joint Eurobonds would give weak euro zone states renewed access to funding in commercial markets. Investors returned to buying the single currency as risk sentiment improved. Until these comments, euro had declined following the downgrade of two big French banks credit ratings. The focus now turns to a conference call due later between Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel that will shed some light on any plans to tackle the Greek debt crisis. EURUSD rose to 1.3741 from an early session low of 1.3590. Meanwhile, the euro was further supported by weak US retail sales data which dragged down dollar.

 

Sterling bounced off eight month lows against the dollar caused by early Europe session risk aversion. GBPUSD climbed to 1.5811from 1.5702 after UK August claimant count unemployment rose by a lower than expected 20,300. Improved risk sentiment following Barroso suggestion of a common Eurobond gave the pound an extra boost.

 

USDCHF slowly inched down throughout the European session after a brief lift from data showing declining Swiss producer import prices. USDCHF fell to 0.8753 from the early high of 0.8853, with weak US retail sales data accelerating dollar’s fall. EURCHF was little changed and remained in an extremely tight range as a result of the Swiss National Bank intervention on September 6 when it introduced a ceiling of CHF1.20 against the euro.

 

USDJPY continued the decline from an early session high of 76.94 trading to a low of 76.65. Weaker than expected retail sales data kept the pair on the down-side. EURJPY remains trapped in a range that began on Monday, trading between 105.73 and 104.39.