EURUSD jumped 0.4 percent after the news that Italian Prime Minister Silvio Berlusconi said he will resign after the new budget law is approved within a few days. This was seen as a positive by the markets who were anxious to see an end to political turmoil and uncertainty in the euro zone’s third largest economy where 10-year bond yields reached record highs today putting the indebted nation at risk of needing a bailout. EURUSD rose to a US session high of 1.3846 bouncing from an earlier low of 1.3765.
Sterling gained 0.6 percent on the day boosted by a NIESR report that said British economic growth held steady at 0.5 percent in the three months to October, which helped calm fears that the UK could be slipping back into recession. Earlier in the day a separate report showed U.K. manufacturing production rose for the first time in four months in September. GBPUSD rose to 1.6129 from a session low of 1.6053.
The Canadian dollar rose versus its U.S. counterpart for a second day after Italian PM Berlusconi agreed to resign once austerity measures are passed, spurring appetite for higher-yielding assets, as the market sees one of the uncertainties as being gone. Also earlier today a report showed Canada’s housing starts were higher in October than economists forecast, which helped boost the loonie. This pressured USDCAD to decline from 1.0170 to 1.0007. Crude oil, Canada’s major export surged to three months high, which benefitted the Canadian dollar as well.
EURJPY pared all losses from the beginning of the US session and bounced after the news from Italy that Berlusconi is resigning. Euro gained 0.4 percent bouncing from a session low of 107.13 to a high of 107.57. USDJPY fell 0.6 percent in the New York session from 78.03 to 77.59, the lowest level since the October 31 BOJ intervention to curb yen strength. The pair was little changed after the Berlusconi news.
Gold reached a fresh six-week high in the US session, topping at $1,802.54 on Italy’s debt woes and political turmoil which boosted the safe haven demand for the metal. However after the news of Berlusconi’s resignation, the gold prices eased down to $1,777.11 as markets breathed a sigh of relief and sentient improved .