Forex Review – Euro dips ahead of Slovak EFSF vote; sterling falls after weak manufacturing data

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EURUSD fell as concerns ahead of the Slovak EFSF vote have weighed heavily on the euro. Slovakia is the final country in the 17-member euro zone that has yet to ratify changes to the 440-billion-euro European Financial Stability Facility. Speculation is that opposition within the coalition government will reject the vote to enhance the rescue fund and any delay in passing the legislation could affect sentiment toward the euro. EURUSD fell from an early session high of 1.3672 down to 1.3577 but remained supported on optimism of the German-French plan to recapitalise banks and contain the sovereign debt crisis.

 

GBPUSD fell after a disappointing report indicating manufacturing production in the UK declined more than expected in August, highlighting the sluggish economic recovery. Factory output fell 0.3 percent compared to July’s gain of 0.1 percent. GBPUSD fell to 1.5611 from 1.5663.

 

EURJPY slid to 104.07 from an early session high of 104.83 as euro is weighed down ahead of the Slovakia vote on the EFSF. Meanwhile the dollar remained weak but steady above 76.60 yen in a tight range.

 

The Australian dollar dipped slightly from its two week high against the greenback yesterday as it was due for retracement but it remains supported as optimism over a European plan to tackle the debt crisis is helping support riskier assets like the aussie and commodities. AUDUSD dipped to 0.9905 from an early European session high of 0.9982 trimming some gains after climbing 2.4 percent on Monday, its biggest one-day rally since June 2010.

 

Gold fell from $1,680.78 down to $1,653.79 giving up some of the previous day’s gains, as stocks and the euro were pressured by waning optimism over a new plan to tackle euro zone debt, and ahead of a vote in Slovakia to ratify changes to the European rescue fund.