Market sentiment improved as the European trading session progressed, reacting to any news coming out of the EU Summit. Markets were very euro-centric today as the EU Summit was the main focus of everyone since it is perceived as a historic meeting.
The euro and most other risk currencies edged up on news that a majority of EU member countries are on track to forge tighter fiscal rules and help tackle an ongoing debt crisis.
Euro was given an extra boost due to speculation that a new Chinese investment vehicle could provide much-needed funding to heavily indebted euro zone countries. EURUSD was lifted by over 1 percent on the day to a European session high of 1.3432 from an early low of 1.3280 after the China report. Reuters reported that China’s central bank plans to create a $300 billion vehicle to manage investment funds in both Europe and the United States.
Sterling tracked gains in the euro and rose to a session high of 1.5733 from 1.5583. EURJPY rose to 104.39 from 103.13. EURCHF got a lift as well to a session high of 1.2371 from 1.2311
Euro remains vulnerable as the EU Summit is still ongoing. German Chancellor Angela Merkel said the leaders of the 17 euro nations reached an accord to tighten budget controls and channel 200 billion euros ($267 billion) through the International Monetary Fund.
On Friday the EU leaders forged ahead with plans for the new fiscal rules, but failed to secure the backing of all 27 members to amend the EU treaty. After overnight talks in Brussels, European officials said 17 euro-zone nations plus six others will participate in a new inter-governmental treaty on fiscal discipline. Britain was among the countries rejecting the deal.