Forex Market Review – Euro up on strong debt auctions and IMF plan to expand lending fund

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The euro gained against the dollar due to upbeat sentiment following a series of positive headlines. The single currency jumped after news that IMF to propose boosting its lending resources by $600 billion (after initial reports of $1trillion).This will help safeguard the global economy against any worsening of the European sovereign debt crisis. At around 10:15 GMT, EURUSD spiked to a session high of 1.2843, rising from the European open price of 1.2759.

 

Also, well-received debt auctions by Germany and Portugal produced lower borrowing costs, helping prop up the euro. Portugal raised the maximum targeted EUR2.5 billion at its T-bill auction, with borrowing costs in line or below previous auction levels. Germany  sold EUR3.44 billion of two-year treasury bills, paying the lowest yield on record.

 

However a stronger momentum in the euro is kept in control by caution ahead of debt-restructuring talks between Greece and its private creditors, due to begin today. Also Fitch Ratings agency commented on a possible two-notch downgrade for Italy.

 

Sterling edged up against the dollar, tracking the rise in EURUSD and risk appetite and brushed off data today that show the UK unemployment rate hit a 16-year high. Unemployment rose 118,000 in the three months to November to total 2.68 million, lifting the unemployment rate to 8.4 percent from 8.3 percent the previous month and higher than forecast. However, December’s claimant count was surprisingly much lower than expected. GBPUSD rose to a session high of 1.5397 from the open of 1.5339. Against the broadly stronger euro, sterling lagged. EURGBP rise to a session high of 0.8352 from 0.8317.

 

The Swiss franc gained following better than expected Swiss January ZEW Investor Sentiment index that gave a reading of -50.1 versus a previous -72.0. EURUCHF remains close to 1.20 SNB floor, falling today to a low of 1.2083 from the open of 1.2093.USDCHF fell to 0.9408 from 0.9476.