Euro was boosted to a new two-month high against the dollar after Greek political leaders, after many delays,finally agreed on a package of austerity measures that were required to secure a second bailout package. Talks with private creditors were concluded in time to be presented at the Eurogroup meeting in Brussels tonight where euro zone finance ministers will approve the plan in order for the 130 billion bailout package to be released by the ECB. Also the plan needs now to be voted on in the Greek parliament and ratified. Any delay on this will again make markets nervous.
In the meantime, market sentiment is high from the news. Also adding to risk appetite was the ECB President’s comments at a news conference after announcing key rates were held unchanged at 1 percent. ECB chief, Mario Draghi announced an easing of collateral rules for the central bank’s liquidity operations, known as LTRO. (long-term refinancing operation). This measure gives much more assurance to the euro zone as they aim to avert a potentially dangerous credit crunch. The first of such measures were introduced on December last year, which resulting in calming financial market turmoil.
EURUSD hit a high of 1.3319 before easing on profit-taking. EURJPY rose to 103.27 from 102.12, the highest level for 2012 so far.
Sterling gained against the dollar after the Bank of England issued a more upbeat outlook on the UK economy after announcing interest rates remained unchanged at 0.5 percent. The bank is also expecting inflation to undershoot its 2 percent target in the medium term without more monetary support. Declining inflation is typically good for a currency and no more quantitative easing will give support to the pound. GPUSD hit a high of 1.5882, rising from a low of 1.5791.
The Canadian dollar strengthened against its US counterpart, to the highest level this year, and the highest since October 31 of last year. The greenback fell, with USDCAD falling to 0.9923. Risk appetite helped lift the commodity-linked currency , which was also buoyed by firmer crude oil prices, a key Canadian export.
Against the Japanese yen, the US dollar extended gains to a three-week high of ¥77.71, from ¥76.99. Dollar was lifted after U.S. weekly jobless claims dipped. Americans filing initial claims for jobless benefits dropped by 15,000 last week to 358,000.