Forex Market Review – Euro up after Draghi says Greece agrees to bailout terms

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ECBThe euro was sensitive to any headlines on Greece today. The single currency rose after European Central Bank President Mario Draghi announced in a press conference this afternoon that he received a call from the Greek Prime minister Lucas Papademos informing him that an agreement has been reached and endorsed by the major Greek political parties in the country on the bailout terms. This will prevent Greece from defaulting.

 

Earlier in the European trading session EURUSD had fallen to 1.3233 from a two-month high of 1.3311 on disappointment that no decision on the bailout plan was likely today.  Euro was little changed after the ECB left rates unchanged at 1.0 percent as expected but then jumped on news from Greece. Several comments from Draghi during his press conference and his somewhat positive outlook on the European economy also helped EURUSD rise back to previous highs, reaching 1.3312. He said that there was notable improvement and stabilization in economic activity though admitted there were downside risks. EURJPY rose to 102.30 from a low of 102.12.

 

Sterling strengthened against both the euro and dollar in London trading hours after the Bank of England announced a 50 billion pound expansion of its asset purchase program, to bring it to 325 billion pounds. Also as expected the BoE left its rates unchanged at 0.50 percent. The bank  forecasted a gradual strengthening later in 2012 based on recent strong data on PMI. The pound also benefited earlier from UK industrial production and trade figures for December. GBPUSD rose to a high of 1.5882 from an earlier Asian session low of 1.5791.

 

Dollar rose against the yen after US jobless claims showed the number of Americans filing first- time claims for unemployment insurance payments unexpectedly declined last week, indicating the labour market recovery is gaining traction. Applications for jobless benefits fell to 358,000 from 373,000. USDJPY rose to 77.34 from 77.09.