Forex Europe Review – Euro reverses gains after Merkel comments

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EURUSD hit a fresh six-week high in European trading on risk appetite over optimism on the outcome of tomorrow’s EU summit. However, before the end of the session, euro reversed direction on comments made by German Chancellor Angela Merkel. It was reported that Merkel is opposed to a phrase in the draft EU summit that calls for the European Central Bank to continue buying bonds in the secondary market. EURUSD which had peaked at 1.3959 immediately plunged to 1.3900 on the comments.


GBPUSD rallied higher in the London session after a flat Asian session, peaking at a new six-week high of 1.6022. Cable took direction for the EURUSD pair today, as the markets were euro-centric today. Sterling was little moved by Bank of England governor King’s speech, though better than expected UK balance of trade data helped support the pound. Also sterling benefited from a weaker US dollar. Speculation that the Fed is inching towards more quantitative easing in coming months weighed on the greenback.


USDCHF fell even further to touch a fresh four-week low of 0.8771 as the dollar was broadly weaker today. EURCHF hovered above 1.2230. Swiss National Bank chief, Phillip Hildebrand said today that he expects the franc to weaken gradually on its own, although policy makers remain “ready to take further steps” if the economic growth outlook or deflationary pressure were to require it. The SNB pegged the franc to the euro at 1.20 francs in September in an effort to curb the swissy’s strength.


USDJPY hovered close to Friday’s record low, but remained above the psychological key support level of 76.00. Risk appetite sapped demand for the safe haven yen sent the yen. EURJPY was up to 106.31 from 105.73 on overall optimism for the euro. However Merkel’s negative comments at the end of the session hurt the euro, bringing it lower.


The Canadians dollar reached its strongest level in one month against its US counterpart. Risk interests supported by optimism over the EU summit helped lift the loonie, which was supported by rising crude oil prices which gained over US$3 today. The Canadian dollar is a commodity-linked currency. Also better than expected Canadian retail sales helped support the Canadian currency. USDCAD touched a low of 0.9989 from the European open of 1.0029. Canadian interest rate announcement later could weaken the Canadian currency if rates stay the same.