Forex Market Review – EURUSD breaks $1.33 after strong German Ifo data

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The euro rose against most of its major counterparts during the European trading session after investor confidence was boosted by a better than expected German business sentiment index, which rose for a fourth straight month to the highest level in seven-months.  The euro jumped to a two-and-a-half month high against the dollar and to a ten-week high against sterling. EURUSD hit 1.3341, the highest since December 12 last year, after rising from a session low of 1.3267, while EURGBP spiked to 0.8488 after the data before easing to previous levels.

 

However, gains are expected to remain capped below $1.33 as concerns still linger as to how Greece will stick to its commitment to implement debt cutting measures set out in the latest bailout deal reached earlier this week. Further dampening optimism is growth concerns in Europe after the European Commission forecast the euro zone to slip back into recession this year with an economic contraction of 0.3 percent in real GDP in the first quarter, to follow from the decline in Q4 of 2011.

 

Against the yen, the euro rose to 106.85 yen, its highest level since mid-November. The yen has been weakening all week and remains under pressure ever since the Bank of Japan announced further policy easing measures this week. USDJPY hit a seven-month high 80.39 yesterday and remains close to those levels today, with a slight dip due to profit-taking. US jobless claims data released towards the end of the European session were better than expected and close to four year lows, so this helped prop up the dollar.

 

GBPUSD benefited from the move higher in EURUSD and climbed to 1.5725 from a session low of 1.5670, to recover some losses made on Wednesday  when sterling fell after a dovish Bank of England minutes.

 

The dollar fell to a 3-1/2 month low versus the Swiss franc, with USDCHF touching 0.9034. The franc is benefiting from some safe haven flows and USDCHF sales have weighed on EURCHF which was pushed down to 1.2047. Fears of a Swiss National Bank intervention due to proximity to the 1.20 franc cap imposed on September 6 by the SNB, will likely keep the pair propped up.