The euro remained on firm footing as the positive tone was set by the euro zone finance ministers meeting in Copenhagen today. An agreement was reached to increase the capacity of the bailout fund to create a firewall to prevent the spread of the region’s sovereign debt crisis. The two rescue funds, EFSF and ESM will be allowed to run in parallel to increase firepower to 800 billion euros.
EURUSD opened European trading at 1.3348 with an early rise to 1.3375 and remaining above 1.3325 in the session. Mixed eurozone economic data today had minimal impact. German retail sales surprisingly fell 1.1 percent in February while eurozone March CPI fell less than forecast down to 2.6 percent. The focus now turns to Spain’s budget, in which the government is expected to announce harsh austerity measures.
The U.S. dollar was broadly weaker as a result of month-end and quarter-end flows and traders squaring their positions. The ICE dollar index which measures the dollar against a basket of currencies, hovers at a one-month low.
Sterling rallied strongly against the broadly weak dollar, breaking past the key level of $1.60 but headed back down after BoE official Alastair Clark said the bank should not look to stimulate UK credit growth. This triggered an opportunity for brief profit taking before GBPUSD bounced back to a four-month high of 1.6035, the highest since November 14.
USDCHF hovered at a one-month low of 0.9008 as the Swiss franc gained over the broadly weak dollar today, based on strong Swiss economic data. The Swiss KOF economic barometer rose higher than expected to plus 0.8 from a previous drop to minus 0.11. EURCHF has been on a decline since the Asian session high of 1.2055, touching low of 1.2042 by the end of European hours.
Yen hovered at a three-week high against the dollar amid financial year end flows. Japanese companies fiscal year ends tomorrow and so yen profits made overseas are being repatriated and foreign currencies sold off. USDJPY fell to 81.82 going into the European session and remained close to that during the session. EURJPY fell to 109.23.
USDCAD held in a tight range in the upper 0.99s and was little changed after Canadian GDP, which was in line with expectations and U.S. personal consumption data, slightly higher than forecast. Session high was 0.9982.
AUDUSD traded a range between 1.0389 and 1.0415 after rising during the Asian session. The market is cautious ahead of China PMI release this weekend and RBA rate announcement on Tuesday.