Euro rallied sharply against the dollar to break past $1.25 for the first time this month. There are hopes that European leaders are working towards a plan to contain the escalating euro zone debt crisis by seeking greater fiscal integration. Separately, finance ministers and central bank governors of the G7 economies have scheduled a conference call for Tuesday to discuss the region’s crisis.
The ECB policy meeting on Wednesday is also in focus and there is speculation that the rate decision will offer some relief to nervous markets. EURUSD rose as high as 1.2508 in the U.S. session, moving further off a 2-year low of 1.2287hit on Friday. However, many believe that euro’s bounce is temporary and the bearish trend will resume.
Sterling made small moves today with London markets closed for a bank holiday and volume was thin most of the day until some pick up in the New York session. GBPUSD climbed to as high as 1.5414, remaining above 1.5363.
Yen weakened further during the U.S. session against the euro and the dollar as risk was back on and demand for the safe haven yen fell. The euro jumped 1 percent against the yen pulling further above an 11-1/2-year low set on Friday. EURJPY rallied to a high of 97.97, well above Friday trough of 95.57. Dollar rose 0.3 percent against the yen to a high of 78.38, moving off a 3-1/2 month low hit on Friday.
Aussie continued to rise against the greenback, up 1.7 percent from the 7-month low hit on Friday. AUDUSD rose to 0.9745 in the U.S. session. The Reserve Bank of Australia policy meeting on Tuesday is in focus, with expectations for a rate cut, which could result in the aussie giving back gains.