Forex Europe Review – Euro under pressure as EcoFin meeting gets underway

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The euro fell against the dollar as investors were reluctant to take large positions ahead of the European Finance ministers meeting in Poland today which U.S. Treasury Secretary Timothy Geithner will also join. The market is not ready to take euro/dollar very far especially ahead of the weekend and decided to unwind long positions and take profits from the surge in the euro yesterday as a result of coordinated action from major central banks to boost liquidity through dollar lending. Discussions at the Ecofin meeting in Poland today are expected to focus on leveraging the euro zone’s bailout fund to make it more effective in fighting the debt crisis. However, disagreement between the ministers could lead to a deadlock and bring the euro under pressure. EURUSD fell to a session low of 1.3753 from the open of 1.3857.

 

Sterling steadied against the dollar as investors booked profits on short positions, but it remained within sight of 8-month lows, pressured by speculation that the Bank of England officials were inching toward more monetary stimulus. If they expand quantitative easing, then this will weaken the pound as the supply of the currency in the system will increase. GBPUSD bounced from a low 1.5741 to hit 1.5826 before easing off again to 1..5768. EURUSD fell as traders wait for further developments from the EU finance ministers meeting amid hopes U.S. Treasury Secretary Geithner may push them towards more aggressive action on the region’s debt crisis. EURGBP fell to 0.8714 from 0.8774.

 

The Swiss franc traded below the dollar early in the session and steadied off as the EcoFin meeting got underway. USDCHF rose to 0.8766 from the session open of 0.8715.The franc weakened from yesterday as a result of the Swiss National Bank held interest rates at zero percent However, against the euro, franc strengthened as the single currency is under pressure due to uncertainty over the outcome of the European ministers meeting in Poland. Without a concrete plan of action to tackle the debt situation of Greece, the euro will surely suffer. EURCHF fell from the session open of 1.2077 down to 1.2052 and consolidated.

 

The yen gained against the euro and the dollar as demand for safe haven status increased as uncertainty hovers around the European Ministers finance meeting on whether they will agree to further measures to tackle the euro zone debt crisis. Concerns grew after Finland Finance Minister Jutta Urpilainen said it was unlikely an agreement on collateral would be reached at the meeting. Investors are unwinding positions on euro and dollar against yen because they prefer not to hold on to them over the weekend, especially since it will be a holiday on Monday in Japan and trading volumes in yen will be light. EURJPY fell from 106.41 to 105.52. USDJPY fell to 76.66 from 76.78.