Forex Market Review – Euro rally loses momentum; attention on Greek debt talks

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The euro had one of its best performances against the dollar this week since October last year, rising by more than 2 percent. Risk appetite in the markets was propelled by a successful bond sale by Spain as well as news earlier in the week that the IMF is planning to expand its lending resources by $500 billion, which will help to protect the global economy from a potential deterioration of the European sovereign debt crisis.

 

EURUSD hit a new two-week high earlier in European trading on Friday at 1.2985 before slipping due to profit-taking as investors eagerly await the outcome of Greek debt swap talks with private bondholders. Private-sector holders of Greek debt described conversations with the Greek government as “productive” but negotiations are still taking place to determine the “haircut” that will finally be applied to the country’s sovereign debt.

 

EURUSD opened in New York at 1.2905, dipped to 1.2887 before bouncing again. A positive outcome of the negotiations in Athens will push euro higher, but any disappointment in the deal will weigh it down.

 

Against the yen, the euro was down 0.5 percent at 99.46, off an earlier three-week high but still comfortably above an 11-year low touched on January16.     The euro has gained more than 2 percent against the yen this week, and was on track for its largest weekly advance since October.

 

GBPUSD rose to a fresh two-week high in the US session, hitting 1.5555 after edging up from 1.5458.

 

The Canadian dollar dropped versus the greenback after the Canada’s inflation rate fell more than expected, increasing the likelihood for a rate cut by the Bank of Canada. USDCAD hit as high as1.0160 after the CPI data, moving off a six-week low that was reached on Thursday.