Forex Market Review – Euro bounces ahead of ECOFIN meeting

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The euro bounced higher in the European trading session on Monday after dipping in the Asian session because of news over the weekend that the Greek debt talks had stalled.  French Finance Minister Francois Baroin this morning was quick to comment that negotiations between Greece and its private creditors are making progress.

Market sentiment began to improve beginning with a successful short-term debt auction by France and Germany. Also optimism is building ahead of the euro zone finance ministers meeting today, with hopes of further talks on dealing with the region’s debt crisis, especially regarding Greece. European Union finance ministers will be in Brussels today to discuss the Greek debt swap, new EU budget rules and a financial firewall to protect indebted states.

EURUSD hit a two-week high of 1.3029, the highest level since January 4. EURGBP soared over 90 pips to 0.8368. Euro was back up past the 100 yen level, hitting as high as 100.18 for the first time since the first week of January.

The safe haven US dollar weakened due to the risk-on environment. The U.S. dollar index, which measures the greenback’s performance against a basket of six other currencies, fell to 79.888 from 80.148 in late New York trading on Friday.

USDJPY fell to 76.85 from an earlier high of 77.07.

USDCHF plunged to 0.9255 from 0.9374. The Swiss franc gained across the board. The weaker dollar against the Swiss franc also weighed on the EURCHF which tracked the move lower in USDCHF. EURCHF fell to a four-month low of 1.2060.

The Australian dollar, which is perceived as a good gauge of general market sentiment, traded above $1.05 for the first time since the start of November, supported in part by rising commodity prices, especially gold. Australia is a major gold producer, and the aussie is a commodity-linked currency. AUDUSD shot up to 1.0565 from 1.0457.

GBPUSD bounced from 1.5515 to 1.5581.