Forex USA Review – Euro rises in anticipation of Slovak vote on EFSF

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EURUSD has had a mixed trading day today, as investors are in a wait-and-see model awaiting the results of the Slovak vote on the EFSF. Earlier in the day, euro fell on concerns that Slovakia would not ratify the changes to enhance the rescue fund as the coalition government is split on the vote. They are still in discussions but results of the vote are expected later tonight or early Wednesday. In the meantime, euro rose in the US trading session, on news that the troika (IMF, ECB, EU) has approved the next 8 billion euro aid tranche for Greece, helping prevent a default. EURUSD rose to 1.3682 from an early low of 1.3564.

 

GBPUSD declined throughout the day today as sterling was weakened by disappointing economic data. A report showed 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 1.5579 in the US session compared to an early session high of 1.5649.

 

The Canadian dollar strengthened against its US counterpart due to rising commodities and improved risk appetite. Crude oil rose over US$2.60 a barrel to hit a high of $86.62 in New York. Canada is a major oil exporter, so its currency is sensitive to moves in oil prices. USDCAD edged down as the loonie strengthened, falling to 1.0270 compared to an earlier day high of 1.0337.

 

The Australian dollar, also a commodity price-sensitive currency, advanced to reach parity with the greenback, regaining losses made in the previous session. AUDUSD hit 1.0001 by late US trading, rising from an early session low of 0.9905.

 

USDJPY traded an extremely tight range in the US session, but remained above 76.60. Against the yen, the euro rose to a session high of 104.88 from 104.01.The euro is in a waiting game for the Slovak vote on the EFSF, but overall there is optimism that Europe is on track to finally tackling the debt crisis, especially after Germany and France pledged to deliver a plan to support banks. Meanwhile, a default by Greece has been prevented for now since the international lenders (IMF-ECB) have agreed to disburse the next aid tranche worth 8 billion euros in November. This spurred investors to embrace risk and shifted away from safe havens like yen and dollar.