Euro extended the rally against the dollar in the U.S. session as risk appetite was back on today after European leaders at the EU summit in Brussels made more progress than investors expected in agreeing on measures to tackle the euro zone debt crisis.
EU leaders finally took action and agreed to create a single supervisor for the euro zone banks. Most important of all they reached a deal that the euro zone ESM bailout fund should be able to directly boost the capital of struggling banks without adding to government debt. This will help lower borrowing costs for the Spanish government whose bond yields have recently reached unsustainable levels.
EURUSD surged to a high of 1.2691 by the U.S. session, gaining 2 percent on the day after the news from the EU Summit. After such a sharp rise, the single currency will likely be due for a correction and profit taking next week.
Most other risk currencies also gained as headlines from Europe dominated the markets today and other data were pretty much ignored. The University of Michigan’s June consumer-sentiment gauge came in at 73.2 versus 79.3 in May, missing expectations for a reading of 74.3.
GBPUSD 1.5705 rose to a high of 1.5705, climbing 1.3 percent on the day.
USDJPY hit 79.96 in the New York trade, moving off an earlier Asian session low of 79.12. Risk appetite dampened demand for the safe haven yen and flows.
The commodity-linked Canadian dollar also gained against its U.S. counterpart as oil prices rose. USDCAD fell to 1.0164 from yesterday’s three-week high of 1.0361.