Forex Market Review- Euro zone accord lifts euro as dollar falls

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Euro bounced back again in the New York trading session to end the day higher after the conclusion of the EU Summit resulted in euro-zone leaders agreeing  to build closer fiscal ties through an inter-governmental accord. The accord is likely be adopted by 26 EU countries with the exception of the UK which feared losing their sovereignty.

 

The new deal, to be adopted by March, is to include automatic sanctions that will discipline  governments that break budget limits. Also at the Summit, a deal was reached on the rescue fund called the European Stability Mechanism (ESM),which will come into force in July 2012, with a lending capacity of 500 billion euros.

 

Euro rose up to a session high of 1.3389 from a low of 1.3316.

Sterling see sawed against the dollar throughout the day, tracking the euro dollar. GBPUSD bounced from 1.5599 to 1.5670.

 

The US dollar fell on improved market sentiment as investors turned to riskier assets. Adding to market sentiment was U.S. consumer confidence data which beat forecasts and rose to a six month high. The preliminary University of Michigan consumer confidence index rose to 67.7 from 64.1, beating expectations for 65.6. The dollar index which measures the greenback’s performance against six other major currencies, fell to 78.622 from 78.789 in North American trade Thursday after touching a high of 79.108.

 

The Canadian dollar followed along broader sentiment and gained from its weakest level of this month after US consumer confidence rose. The US is Canada’s biggest trade partner. US data combined with Europe’s latest plans to deal with its debt crisis spurred appetite for riskier assets. Canada’s currency appreciated 0.8 percent in the North American session as USDCAD fell from 1.0252 to 1.0172. Rising crude oil  price also helped the loonie rise since Canada is a major oil exporter.

Crude oil rose to US$99.71 from US$97.36.