Forex Market Review – Euro stable after Spanish bond sale; CHF up after SNB keeps euro peg

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Euro was more stable against the dollar today as it took a pause after falling to an eleven-month low on Wednesday. A successful Spanish bond auction helped keep the single currency supported. The Spanish Treasury sold nearly twice as many bonds than planned at its final auction this year in very strong demand. Yields however, remained elevated after the auction and only eased marginally. On Wednesday the euro had fallen to its lowest level since January after Italy’s borrowing costs surged to euro-era highs at its bond auction, renewing fears over the euro zone debt crisis. EURUSD moved off Wednesday’s 11-month low of 1.2945 to a European session high of 1.3048.

 

Meanwhile, some euro zone economic data today helped to stabilize market sentiment after first estimates of the Purchasing Manager’s Indexes in December showed a slight improvement over November, even though the data still signaled a deep economic contraction ahead. German and French PMI were also slightly improved though below the key level of 50. Euro zone CPI was stable at 3.0 percent in November as expected indicating inflation in the region is steady. Quarterly employment change fell by 0.1 percent beating expectations for an increase and lower than the previous quarter increase of 2.0 percent.

 

Late in the European session and early North American session open, market sentiment was given an added boost after U.S. data showed weekly jobless claims fell to their lowest level since May 2008 and the Empire State manufacturing index at its highest level in seven months.

 

Sterling bounced against the dollar after dipping from poor UK retail sales data. GBPUSD climbed to a session high of 1.5528 from the open of 1.5448. Weak UK December CBI Industrial orders expectations fell to minus -23, lowest since Oct 10, and kept sterling gains capped.

 

The Swiss Franc surges against the euro and the dollar after the Swiss National Bank failed to intervene in the currency markets and announced today that it maintains its 1.20 Franc floor versus the euro and kept its LIBOR rate at near zero. Prior to today’s announcement the Swiss currency weakened sharply in the past two days as investors feared that the euro/franc peg would be raised and would weaken the franc. Since this did not happen, USDCHF fell from its highest level since March, from 0.9546 to 0.9395. EURCHF fell over 1 percent to 1.2251 from an earlier high of 1.2395.

 

The dollar index which measures the greenback against a basket of six rivals, slipped to 80.252 from 80.538 in late North American trading on Wednesday.

USDJPY fell from 78.05 to 77.72. EURJPY has been steady in a 101.03/ 60 range.