Forex Europe Review – Euro rises on optimism to avert debt crisis

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EURUSD was volatile today and remained fragile as it fluctuated to any news that came out. Overall, the market took some relief from reports that EU policy makers are attempting to avoid a worsening of the region’s debt crisis. EU officials were planning to leverage up the EFSF rescue fund. However Spanish Economy Minister Elena Salgado said an expansion of the euro zone’s bailout fund to 2 trillion euros was not on the table, dampening optimism slightly causing euro to dip but soon recovered. Meanwhile, Greek Prime Minister George Papandreou is in Berlin for talks in Berlin, two days before German lawmakers vote on the enhanced rescue fund,and there is hope he will give some optimism on progress to avert a default by Greece. EURUSD the European session at 1.3543 and touched lows of 1.3480 and highs of 1.3602.

GBPUSD tracked the EURUSD pair, moving to its highest level in a week to peak at 1.5626 after touching lows of 1.5523. Sterling has moved well off a one-year low hit versus the dollar last week, but it may face more selling pressure due to rising speculation that the Bank of England may implement more monetary stimulus before year-end to boost the struggling economy.

Yen weakened against both the euro and the dollar as risk appetite picked up on hopes that Europe is working hard towards stemming the debt crisis and most importantly trying to avert a banking crisis. EURJPY moved well off its ten year low of 101.92 reached yesterday and hit a European session high today of 104.01. USDJPY also rose, peaking at 76.57 from 76.30.

The Swiss franc weakened slightly against the euro as the single currency strengthened against most counterparts today on hopes the euro zone may boost its support for debt-stricken members. EURCHF hit a high of 1.2236 bouncing from a low of 1.2185. A broadly weaker US dollar fell against the Swiss franc to 0.8979.

The Canadian dollar rallied against its US counterpart as risk appetite lifted commodity linked currencies along with commodities and equities as European officials discussed new action to cut Greece’s debt and recapitalize the region’s banks. USDCAD fell to a low of 1.0187 from an earlier high of 1.0279.

The Australian dollar, also a commodity linked currency, benefited from improved market sentiment and increase in risk appetite and has been steadily rising against the broadly weaker US dollar. AUDUSD moved off a 9-1/2 month low reached yesterday to hit a high of 0.9937 today. Investors are hoping that EU officials are acting fast on tackling Europe’s banking and debt crisis.