Forex Market Review – Euro rebounds back above $1.31, Spanish bond auction eyed

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Euro rebounded against the dollar in the U.S. trading session, bouncing above $1.31. Earlier in the European session, EURUSD tumbled to 1.3066 as markets were nervous ahead of Thursday’s important Spanish 10-year bond auction which will be a real test for the euro. But the pair soon rose to a high of 1.3136. Lack of U.S. economic data today meant the dollar took direction from US equities, which were lower today.

 

Sterling made gains across the board today after a more positive Bank of England policy meeting minutes of the April meeting were published earlier today. The report showed policy makers were moving away from further stimulus based on elevated inflation and better growth prospects for the UK. No expansion of QE buoyed the pound. A drop in the unemployment rate also helped. GBPUSD rose to a two-week high of 1.604, gaining over 125 pips since the BOE minutes. EURGBP fell to a nineteen-month low of 0.8172.

 

Yen remained weaker as Bank of Japan Deputy Governor Nishimura’s comments at a press conference today suggested additional stimulus and easing might be possible. USDJPY reached a one-week high of 81.55 in European trading and eased slightly on profit taking but remained above 81.20. EURJPY traded above 106.45, rising for the third straight day.

 

The Canadian dollar remained firm after gaining sharply on Tuesday following the Bank of Canada policy meeting. There is speculation for a rate increase after the BOC suggested higher growth forecasts, for Canada. USDCAD hovered at 0.9880.

 

Crude oil prices declined sharply after a weekly inventory report showed a larger-than-expected increase in crude supplies. Crude fell over $2 on the day, to a low of $102.17.