Forex Review – Swiss Franc gains as nervous investors flee to safe haven

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The Euro gained against most majors in anticipation as Greece prepares for a confidence vote that may determine the indebted nation’s financial future. There is great optimism the Greek parliament will pass the austerity plan and Greece’s Prime minister George Papandreou will win a parliamentary vote of confidence in the new cabinet later tonight. This outcome will prevent a default as this was a condition on receiving further loans. The Single Currency has been on the rise since yesterday’s news that the European Financial Stability Facility funds will be raised to 780 billion Euros from 440 billion. EURUSD rose to 1.4421 from a US session open of 1.4362.

 

Sterling rebounded after dipping briefly in the earlier session in reaction to weak economic data on Net public sector borrowing which added to the gloom over the UK budget deficit. Bank of England policy maker Paul Fisher made dovish comments basically indicating more quantitative easing and maintaining interest rates at record lows. Cable soon rebounded as the market had already discounted this possibility. The Pound’s support was also provided by a weaker US Dollar, which is under pressure before the US Fed FOMC meeting tomorrow, which is also expected to announce interest rates to be kept on hold. GBPUSD rose to 1.6248 from the open of 1.6197.

 

USDCHF extended losses in US trading, dropping from 0.8445 to 0.8399. The Swiss Franc is a safe haven asset which investors are currently fleeing to during these uncertain economic times, not only due to the Greek debt crisis but a global economic slowdown, including in Asia and the US and of course Europe. Property markets are slumping and investors prefer not to place money in assets but rather ins safe haven assets like the Franc.

 

The Canadian Dollar gained against the greenback in US trading with USDCAD dropping to 0.9711. Rising crude oil prices helped lift the loonie which is a commodity linked currency and so is affected by moves in oil prices. Renewed risk demand boosted commodity prices ahead of the Greek confidence vote.

 

Gold climbed steadily all day to highs of $1,547.83, the highest level in almost two weeks. Gold is supported by US Dollar weakness (inverse relationship). The greenback has been weighed down by poor economic data and fundamentals. Data today on Sales of existing U.S. homes in May showed a drop to the lowest level in six months. Meanwhile, on Wednesday (tomorrow) the U.S. Fed’s Open Market Committee will announce interest rates, which could squeeze the Dollar, and push gold higher. The Fed is expected to hold interest rates near zero for an extended period amid evidence that the U.S. recovery has lost momentum.

 

EURUSD USDJPY GBPUSD USDCHF USDCAD GOLD
OPEN

(12:00 GMT)

1.4363 80.17 1.6197 0.8436 0.9764 1543.78
DAY’S HIGH 1.4421 80.18 1.6248 0.8445 0.9773 1547.83
DAY’S LOW 1.4348 80.04 1.6180 0.8399 0.9711 1540.68
CLOSE

(21:00 GMT)

1.4403 80.15 1.6244 0.8402 0.9722 1546.73

Note: Daylight Savings Time in Effect for GMT