Forex Market Review – Euro buoyed by relief rally after Greek austerity vote passes

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The euro made gains against most of its major counterparts today after the Greek parliament passed a bill on austerity measures, making it more likely the country will receive a second bailout from the EU-IMF and avoid a default.

 

EURUSD hit a high of 1.3283 in the European trading session, moving up from the Asian session open level of 1.3204.  EURJPY reached 103.17 from an early Asian session open price of 102.43. EURGBP hit 0.8400.

 

However, the euro still remains vulnerable because there is still one more step needed. The European Union must still decide whether to release the rescue package, and this will be decided at the euro-zone finance ministers meeting in Brussels on Wednesday.

 

The successful Greek austerity vote caused a relief rally in most risk assets and risk appetite was stronger today as some concerns were eased that Greece is close to receiving a 130 billion bailout in order to be able to meet a 14.5 billion euro bond repayment due on March 20. Without the bailout, Greece will go through a messy default.

 

The British pound rose against the dollar to 1.5826 in the London session from 1.5772 in Asian trading. The commodity-price sensitive Australian dollar  also rose as gold prices (the country’s major export) rose as well. AUDUSD reached 1.0776, up from the Asian open price of 1.0688. Gold prices climbed due to the weaker US dollar, peaking at $1,732.99. On Friday, gold prices touched lows of $1,704.45 due to uncertainty ahead of the weekend Greek parliamentary vote.

 

Due to less safe haven demand, the ICE dollar index which measures the USD against a basket of six other currencies, fell to 78.756 today from 79.149 in late trading at the end of last week.

 

The dollar remained stronger against the safe haven yen, continuing to be supported and trading in a 77.56 -77.76 range. Earlier in the day yen weakened against the dollar after a report that Japan’s economy shrank an annualized 2.3 percent in the fourth quarter from the previous three months, in most part due to the strength of the Japanese currency hurting exports. Focus turns to the Bank of Japan monetary policy meeting tomorrow. Some speculate that the central bank could consider more monetary easing in order to cap yen strength as gains in the yen worsen losses for exporting companies.