Forex Market Review – Euro recovers slightly on hopes of EU aid to Spanish banks

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Euro  fell 1 percent most of Friday before recovering part of those losses in the U.S. session. EURUSD spent the early  New York session below $1.25, weakened by Spain’s downgrade from Fitch. The pair then recovered  slightly to 1.2516 later in the session as investors looked to Saturday, when reports said Spanish officials may ask for rescue for Spanish banks.

There is strong speculation that progress will be made over the weekend of some agreement to add new funding into Spanish banks even in the form of a bailout. This would drastically help stabilize market sentiment which has been in turmoil lately over concerns of the euro zone debt crisis. At the moment, the outlook for the euro is extremely bearish.

GBPUSD  fell 0.7 percent during the day before bouncing off a low of 1.5403 to 1.5472. Earlier in the day, UK data related to inflation showed PPI can in lower than expected, thus pressuring the pound.

Yen weakened against the euro going into the U.S. session, with EURJPY rebounding off a low of 98.52 to 99.45.

The Canadian dollar weakened by 0.4 percent against the greenback after data showed a lacklustre job creation of only 7,700 jobs  following April’s gain of 58,200 jobs.  The loonie soon recovered and pushed USDCAD down to 1.0268.

The higher-yielding Australian dollar was flat on the day against the American dollar.  AUDUSD pretty much had a V-shaped recovery, beginning the day at 0.9893, falling to 0.9819 and rising back up to 0.9925. Data from China over the weekend will affect aussie, since China is a major trading partner for Australia.