Forex Market Review – Euro tumbles to 9-month low against sterling

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The euro was under pressure in Monday’s European trading session as investors are unconvinced that the new EU accord will do much to address the short-term challenges posed by the debt crisis. The new deal was put together at last week’s EU Summit and forges closer fiscal ties between euro zone members. Twenty-six EU countries agreed on the accord except the UK.


Adding to risk aversion were negative comments by Moody’s which said that it still intends to review the ratings of all EU countries during the first quarter of 2012 given “the continued absence of decisive policy measures.” Standard & Poor’s Ratings Services also warned last week that it may downgrade the ratings of 15 euro-zone nations, so the focus will turn to the coming days to see whether they will go through with the downgrade.


EURUSD fell to 1.3250 from 1.3351. Euro tumbled to a nine-month low against the British pound, touching a session low of 0.8475 from the session high of 0.8553. Sterling also rebounded against the dollar to track gains against the euro. GBPUSD bounced from 1.5536 to 1.5656.


The U.S dollar gained against major counterparts as investors avoided risky assets and turned to the perceived safe haven greenback to protect their assets on renewed concerns about the euro-zone sovereign-debt crisis. The U.S. dollar index  which tracks the performance of the greenback against a basket of other major currencies, rose to 79.177 from 78.622 in late North American trading on Friday.


The dollar gained against the Japanese yen, rising to 77.86 from 77.59 European opening level. EURJPY fell from 103.60 to 103.13.


Commodity-linked currencies like the Australian dollar and Canadian dollar weakened due to falling commodity prices, especially crude oil and gold. Crude fell to a session low of US$97.88 versus the New York close on Friday at US$99.79. Gold declined on a firmer US dollar to lose $37 an ounce, reaching down to $1,675.93. USD and gold have an inverse relationship.


AUDUSD fell 0.9 percent in the session to 1.0090 while USDCAD rose to 1.0270 from 1.0211.