Forex News – Sterling falls after Osborne unveils lower growth forecast

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Euro was boosted by improved risk appetite following a successful Italian bond auction where the Italian government was able to sell the full allotment, selling the target 7.5 billion euros worth. Although yields are at euro-era record highs, investors nerves were eased that Italy was able to sell off the bonds as it is important for the government to still be able to raise funds in the debt markets. EURUSD surged to 1.3440 after the auction but soon eased back down to 1.3305 after news that the ECB failed to meet its target deposits from banks that would neutralize its purchases of bonds from debt-ridden euro zone countries. The focus now turns to the European finance ministers meeting in Brussels tonight and tomorrow, where they are expected to reach a deal to leverage the EFSF rescue fund.

 

Sterling rose to a high of 1.5655 against the dollar, benefitting from upbeat sentiment. However cable fell after the UK Chancellor of the Exchequer, George Osborne’s Autumn statement. The UK government unveiled sharply lower economic growth forecasts and said it would take longer than hoped to cut the deficit, meaning that tough austerity measures would extend beyond 2015. GBPUSD fell to 1.5584.

 

Against the Japanese yen, the dollar lost all gains from the Asian session to slide to 77.61 from 78.01. EURJPY was choppy, and see sawed between 103.60 to 104.39 and back down to 103.43.

 

Oil prices turned higher in the European trading session, gaining as much as 2 percent to peak just shy of the key $100 level, hitting $99.28. This helped lift the commodity-linked Canadian dollar since Canada is a major oil exporter. USDCAD fell to 1.0257 from 1.0352.