Forex Market Review – Euro gives back gains as rally from Spain bailout fades

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Euro gave up earlier gains against the dollar going into the European session after a sharp rally during the Asian session was not sustained and euro zone debt fears returned. EURUSD opened in Asia with a gap higher after news over the weekend that Spain will receive financial assistance up to 100 billion euros from the EU in order to recapitalize its troubled banks. This had a positive effect on markets but EURUSD soon declined in Europe to fill the gap, falling to 1.2532 from the session open of 1.2642.


Euro remains vulnerable ahead of key Greek elections this Sunday, June 17. Any unfavourable results could cause a flare up in the crisis and end the temporary relief given to markets by the Spanish bank bailout.  A win for Greek political parties opposing the EU austerity terms of the Greek bailout could risk Greece exiting the euro zone.


GBPUSD held on to gains most of the session, trading between 1.5522 and 1.5580, though began to edge lower going into the North American session as the euphoria form the Spain bank bailout began to fade. EURGBP which had gapped higher to 0.8156 in the Asian open from Friday’s close of 0.8079, soon fell to fill the gap and reached near Friday’s closing levels.


Dollar rose across the board against risk assets, also gaining against the Swiss franc as market sentiment began to sour. USDCHF rose from a 2-1/2 week low of 0.9475 reached in Asia to climb to a high of 0.9579 in Europe.


Yen saw demand for its safe haven status pick up in the European return as risk appetite began to falter. USDJPY opened in Europe at 79.62 and fell to 79.35 going into the New York session overlap. Meanwhile euro fell faster against the Japanese currency, with EURJPY dropping to 99.47 from 100.72.