Forex Market Review- Euro rebounds ahead of EU Summit

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Euro rebounded in the US session and reversed earlier losses against the dollar as optimism built up ahead of the ECB policy meeting on Thursday and the EU Summit on Friday. European leaders are expected to agree on measures to help solve the euro zone debt crisis. EURUSD rose to a session high of 1.3426 from 1.3349. Euro climbed after news that French President Nicolas Sarkozy and German Chancellor Angela Merkel met today to set out their plan to press ahead with changes to the European Union treaty to allow for tighter fiscal union. Meanwhile, US Treasury Secretary Timothy Geithner said in Paris today that he has faith in the ability of European leaders to solve their debt crisis. Earlier in the day the euro had fallen sharply following reports that Germany is rejecting the latest proposal to boost the euro zone rescue fund.

 

The dollar index which measures the U.S. unit against a basket of six major rivals, traded at 78.427, turning down from 78.498 late Tuesday, as market sentiment picked up slightly.

 

Sterling hit a one-month high against the euro coming close to its highest level since March after a German official dampened hopes of a debt solution at the EU Summit. EURGBP fell 1.2 percent on the day to 0.8509 before recovering slightly. Meanwhile GBPUSDD rose to 1.5772 from 1.5594.

 

The Canadian dollar declined from the strongest level in a month on increased risk aversion due to concerns over the European debt crisis. USDCAD bounced from an earlier one month low of 1.0065 to peak at 1.0131. Meanwhile falling crude oil prices also weighed on the Canadian dollar since oil is a major export for Canada.

 

Crude oil prices declined to US$99.66 from $101.92 after a weekly government supply report showed a surprise increase in inventories. Also, investors’ concerns about the euro zone growth dragged prices down.

 

Gold prices ended higher as the US dollar weakened and concerns with the fate of the euro zone flared up. This helped snap a two-day losing streak for the precious safe haven metal. Gold rose to $1,742.44 from a low of $1,719.78.