Forex Market Review – EURUSD hits 5-month high before falling

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Market sentiment was dampened halfway into the US trading session following weak US new home sales data which showed an unexpected decline last month. The 2.2 percent drop in sales in December marked the slowest year for builders on record.


Prior to the home sales report, sentiment was still upbeat, as Wednesday’s Fed decision to keep interest rates low until 2014 still resonated across markets. Earlier in Europe, a strong Italian bond auction and the resumption of Greek debt talks held markets steady. Then by the New York session, US jobless claims data showing a drop and US durable goods rising 3 percent in December further bolstered sentiment.


EURUSD which had hit a five week high at 1.3182 until the home sales report soon fell to 1.3094 by late US trading.


Sterling which had fallen to a near four-week low against the euro on worries about UK economic weakness, had reversed course. EURGBP fell from 0.8397 to 0.8347.  Meanwhile GBPUSD hit a five-week high of 1.5733 early in New York trading but soon retreated.


The Canadian dollar breached parity with the greenback for the first time since November 1 early in the US session, strengthening to C$0.9980 against the US dollar, or US$1.0020, in reaction to the Fed statement on rates. The loonie then retreated later in the session following a drop in risk appetite as well as crude oil prices tumbling over $2 after the disappointing US homes sales data. The Canadian dollar is sensitive to price movement in oil since Canada is a major oil exporter.