Forex Market Review – Euro rallies back above $1.25

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Euro rallied against the dollar in choppy  trading after the European Central Bank left interest rates unchanged.   A rate cut would have been negative for the euro.   The ECB held its main interest rate at 1.0 percent but left a sense that there would be some willingness at least for them to contemplate providing stimulus should data begin to deteriorate. EURUSD rose to a high of 1.2581 in the U.S. session, up from  an earlier low of 1.2440.


Meanwhile, some market participants are expecting the Federal Reserve to ease policy  before the ECB and this could be a reason behind the dollar being weaker against the euro. Fed Chairman Ben Bernanke’s  testimony to Congress on the U.S. economy is on Thursday.  Any hints on the possibility of more quantitative easing are seen as key.


Sterling was boosted by better risk sentiment. GBPUSD consolidated earlier gains during most of the U.S. session before a late rise to 1.5502, up 0.8 percent on the day.


Yen weakened further due to less demand for safe havens since risk appetite was up today. USDJPY hit a high of 79.26, up 0.7 percent on the day. EURJPY rose as euro gained against most major counterparts, hitting a high of 99.71, which is the highest level this month.


The Canadian dollar appreciated for a third day versus a weaker USD , the longest streak since April. This pushed USDCAD down 0.6 percent to 1.0274.


Aussie gained versus all of its major counterparts after a report showed GDP grew twice as fast than forecast. AUDUSD rose 1.5 percent to 0.9927, the highest since May 22.