Forex News Review – Euro falls on euro zone debt concerns as Sarkozy and Merkel meet for talks

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Euro changed direction in the US trading session and lost gains as as French President Sarkozy rushed to Berlin for a meeting with German leaders to narrow divisions beforethe European summit this weekend, and to deal with the issue of how to expand the EFSF rescue fund. Euro had performed well earlier in the day on optimism ahead of the EU summit that some progress will be made to tackle the debt crisis. Meanwhile the Greek government today is debating austerity measures it has to vote on this Thursday. Adding to the damp sentiment were falling US stocks and oil after a U.S. survey of conditions released by the Federal Reserve said that prospects for the growth of the US economy appeared to be dimming. Apple’s disappointing earnings led the drop in US equities. EURUSD tumbled to 1.3731 from a day high of 1.3868.

 

GBPUSD extended gains early into NY trading, gaining 155 pips in the day despite the release of dovish Bank of England policy meeting minutes, sterling held strong reaching a near month high against the dollar on strong risk appetite in the markets. After peaking at a near month high of 1.5847, cable fell to 1.5750 as the US session got underway and risk was off the table again.

 

The Canadian dollar pared gains later in the US session against its U.S. counterpart as risk aversion returned to the markets and investors were concerned that European leaders may fail to reach an accord to deal with the region’s debt crisis increased investor risk aversion. Crude oil, Canada’s major export, dripped by $3.60 a barrel today which weighed down on the commodity price-sensitive Canadian currency. USDCAD rose from an early NY session low of 1.0084 to 1.0186.

 

EURCHF dropped from a 5-month high of 1.2472 to 1.2404 as euro weakened across the board on eurozone debt concerns and damp sentiment. USDCHF opened the US session at 0.8975 and rose throughout the session to 0.9037 as risk aversion pushed investors to the safe haven US dollar.

 

USDJPY opened New York at 76.77 but was little changed as it traded in a range since Monday, between oscillating between 76.85 and 76.67. EURJPY fell to 105.35 from a high of 106.52 as euro was dragged down against most major counterparts on concerns about the euro zone debt crisis.