Forex Market Review – Euro remains firm above $1.31; GBP gains after UK retail sales up

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Euro climbed slightly higher in European trading, though mostly consolidating recent gains. A broadly positive sentiment in the markets buoyed the single currency on signs that Greece is progressing closer to securing a second bailout.

Euro was supported above the $1.31 level against the dollar helped by narrowing peripheral euro-zone bond yields and higher regional equity markets.

EURUSD hit a session high of 1.3173 during European trading hours. In the New York session overlap, the pair pushed higher to 1.3188 after US economic data on inflation. CPI data rose more than expected in January, rising the most in four months.

EURJPY rose to 104.46 in Europe and then climbed higher to 104.61 after the US data, the highest level since December 5.

The hopes for some agreement at the Eurogroup meeting on Monday on further financial aid for Greece will probably help support the euro into the weekend but further gains are likely to be capped as investors will be unwilling to get into new positions ahead of the weekend and a long holiday weekend in the United States where markets will be closed on Monday for President’s day. Most would prefer to wait for more clarity on the details of any Greek bailout deal.

Sterling made big gains today against the dollar after strong January retail sales data. Sales numbers beat forecast and jumped 0.9 percent, despite a forecast for a 0.4 percent drop. These surprisingly positive numbers show that the UK economy is staying clear of heading back into a recession.

GBPUSD rose to 1.5861 from a session low of 1.5788 after the sales data the retraced on profit taking.

USDCHF headed down to 0.9165 as risk appetite pushed investors away from the safe have US currency.

USDJPY on the other hand rose to 79.35,, the highest level since the October 31 Bank of Japan intervention in the currency markets. Yen is weaker as a result of this week’s further easing by the BOJ.