Forex Review – Euro extends decline as Greek debt deal put to referendum vote

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EURUSD fell by 2 percent today as the pair fell to the lowest in three weeks over concerns the euro zone debt deal is at risk if Greek Prime Minister George Papandreou goes ahead with his shocking decision to hold a referendum, which if rejected will lead to Greece defaulting. German Chancellor Merkel called an emergency meeting tomorrow to push the EU commitment to implementing the EU Summit debt deal. This helped eased investor fears a little and enabled the euro to claw back some gains, also helped by a weaker dollar after unexpectedly lower U.S. factory activity data. EURUSD rose from the day low of 1.3607 to rise in the US session to 1.3762 before easing down to close at 1.3692.

 

GBPUSD rebounded in the US session after declining 1.2 percent on the day. The risk-averse sentiment in markets pushed investors towards the relative safety of the U.S. dollar which weighed the British pound down to a low of 1.5889, its lowest since October 21.GBPUSD soon rebounded to 1.5951. Meanwhile sterling hit a one-month high against the euro early in the US session due to Greece’s decision to hold a referendum on an EU bailout which stoked concerns that the debt crisis was escalating and drove speculators to cut positions. EURGBP fell to 0.8547 before bouncing after being over-sold.

 

USDCAD rose 1.6 percent today as damp risk appetite lifted the greenback up as investors turned to the safe haven and liquid USD. Tumbling crude oil prices, Canada’s major export, also weighed the loonie. USDCAD surged to 1.0207.

 

EURJPY recorded its biggest daily fall in two weeks after Greek Prime Minister Papandreou pledged to put the European Union’s latest accord to a referendum vote. EURJPY fell to a day low of 106.47 before bouncing in the US session to 107.73 then easing down again. USDJPY has been little changed since the Bank of Japan intervention on Monday but yen has been struggling to stay weak.