Market Review- Euro reverses losses after report on boosting EU rescue fund

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Euro reversed losses to head to a new session high late in US trading in reaction to a Financial Times report that EU leaders are in talks to double the size of the EFSF rescue fund. The report said strengthening the bailout fund could include running two separate rescue facilities. This means combining the temporary existing 440 billion euro fund with the planned permanent rescue facility in order to increase funding. EURUSD jumped to 1.3419 from an early session low of 1.3359. Euro had weakened earlier on concerns regarding the Standard and Poor’s warning of downgrading AAA rated euro zone countries.

 

The Canadian dollar gained over 1 percent against the US dollar after the Bank of Canada kept rates unchanged and signalled there would not be any monetary easing in the near term. Policy makers said growth in Canada is stronger than forecast. Also the United States, which is Canada’s major trading partner is also doing well and will benefit exports there. USDCAD fell to 1.0084 from 1.0201.

 

Sterling weakened against both the dollar and the euro today due to weak UK economic data versus stronger German data. UK house prices fell and a British Retail Consortium survey showed retailers last month suffered their biggest annual drop in like-for-like sales since May. Meanwhile, this contrasted with data on German industrial orders, which rose by 5.2 percent during October, their strongest gain since March 2010 and more than double the highest forecast. EURGBP rose 0.8 percent on the day to 0.8602 from 0.8537.

 

The Swiss franc weakened against the euro and the dollar today after data showed Swiss consumer prices fell in November. This fuelled speculation that the Swiss National Bank may raise the current 1.20 franc peg against the euro. EURCHF rose to a high of 1.2427, the highest since November 17, gaining 0.8 percent from the day low of 1.2328.