Forex U.S. Review – Canadian Dollar at 7-week high against USD, gold falls after Greek austerity bill passes

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The Euro rose against most major counterparts today following the news that the Greek parliament approved legislation for austerity measures. Additionally, the Single Currency was lifted against the Dollar by favourable interest rate differentials. European Central Bank President Jean-Claude Trichet reiterated his hawkish bias towards inflation, boosting market confidence that a rate hike is due at the ECB meeting next Thursday. In contrast, the U.S. Fed will not likely raise interest rates anytime soon to allow the struggling US economy to recover.

 

 

Sterling rebounded from lows and pared all losses made in the European session earlier when it had plummeted due to weak economic data. After the Greek vote passed legislation for austerity measures, risk appetite built up, which helped lift the Pound and sank the Dollar. GBPUSD rebounded to 1.6094 from 1.5982. Meanwhile against the Euro, Sterling only slightly gained only due to buying on dips in the US session since EURGBP pulled back from its highest level since mid-March 2010. Overall any gains in Sterling will be capped since investors have steadily pared back chances of a rate hike, with most expecting the first quarter percentage point increase only in the middle of 2012.

 

 

The Swiss Franc weakened against most of its major counterparts following the good news of the outcome of the second round of voting in the Greek parliament. Approval of a law to impose austerity measures lifted market sentiment and consequently suppressed some investor demand for safe haven assets like the Swiss Franc. The Euro rose against the Swiss Franc, with EURCHF surging to a two-week high of 1.2244 from the session open price of 1.2073. USDCHF surged 126 pips from 0.8338 to 0.8463.

 

 

The Canadian Dollar strengthened to a near seven-week high against the greenback after being boosted by an upbeat market sentiment as fears of a Greek default eased, plus there were some good fundamental coming out of Canada today. Gross domestic product (GDP) data was slightly better-than-expected , and also yesterday there was stronger-than-expected inflation data. Both of these factors raise the prospect that the Bank of Canada will lift interest rates sooner . USDCAD edged down to 0.9623 from the session open of 0.9668.

 

 

Gold declined following news that the Greek parliament voted in favour of legislation to implement austerity measures which gave optimism to markets and confidence that the debt ridden nation will avoid a debt default. Because of this, investors turned away from the safe-haven asset. Spot gold dipped from $1,512.78 to $1,499.73.

 

EURUSD GBPUSD USDCHF USDCAD GOLD
OPEN

(12:00 GMT)

1.4473 1.6006 0.8340 0.9668 1510.18
DAY’S HIGH 1.4536 1.6094 0.8463 0.9671 1512.78
DAY’S LOW 1.4447 1.5982 0.8337 0.9623 1498.78
CLOSE

(21:00 GMT)

1.4500 1.6047 0.8407 0.9642 1498.78

Note: Daylight Savings Time in Effect for GMT