Forex Market Review – Euro bounces on Greek debt optimism, then falls after US GDP

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Euro bounced back in European trading, heading for a second weekly gain versus the dollar and yen as optimism for an easing to the euro zone debt crisis is building up after some positive news today. First, the Italian Treasury sold the full amount of debt at its planned bill auction today. Second, sentiment was upbeat on news that the Greek debt talks are making progress and a debt swap deal is close.

EURUSD opened in Europe at 1.3111 and climbed to 1.3159. Late in the session, the euro turned negative after GDP data from the US came in lower than forecast and dampened sentiment slightly.

 

Sterling tracked the euro higher and rose up close to the one month high hit yesterday against the dollar. GBPUSD hit a high of 1.5718 rising from 1.5674. The pound remains vulnerable as speculation is growing over another round of QE due to soft UK GDP.

 

The Swiss franc fell against the euro after the KOF economic research institute said its leading indicator for the nation declined to negative 0.17 in January from 0.01 in the previous month. The Swiss currency snapped a two day gain against the euro and EURCHF jumped to 1.2084 after the data from 1.2060.

 

USDJPY extended losses. After ranging in the lower 77s, the pair fell further to as low as 76.80. The dollar weakness against yen was mainly due to the shift in the US- Japan interest rate spread after the Fed pledged to keep US rates low, so there is less demand to hold the USD now. A further catalyst to the dollar weakness was the disappointing GDP numbers released today.

 

The New Zealand dollar maintained its rally against the greenback on strong domestic trade data. NZDUSD extended a sixth-weekly gain to 0.8248 after NZ Reserve Bank Governor Alan Bollard said the economy can weather a global slowdown. Exports exceeded imports by NZ$338 million in December, beating a predicted NZ$50 million shortfall. The kiwi began to turn negative by the end of the European session after the weak US GDP dampened risk sentiment.