The euro rebounded from a month low against the dollar early in European trading to climb 1 percent and peak at 1.3556. The boost was given by news that the ECB was buying Italian and Spanish bonds in an effort to narrow the yield spread with the benchmark German bunds. The gains made by the single currency were short-lived as EURUSD soon fell back down to 1.3454. The euro-zone debt crisis continues to plague the market and is making investors nervous. ECB buying bonds from troubled economies is only a short-term solution and is not dealing with the underlying problem.
The British pound fell for a third day against the dollar as U.K. unemployment increased to the highest level in fifteen years at 8.3 percent. The Bank of England in its quarterly inflation report today said that the UK faces a “markedly weaker” outlook for economic growth, signalling it may expand quantitative easing. These stimulus measures consequently result in weakening the currency as more pounds are injected into the system when the BoE buys more bonds. GBPUSD fell to a session low of 1.5743 from an earlier high of 1.5811.
The Canadian dollar slid for the third day against its U.S. counterpart amid signs that Europe’s debt crisis was spreading. The loonie is trading off of headline risk and is reacting to any news from Europe. After tracking gains in the euro early in the European session, the Canadian currency soon pared all gains. USDCAD see sawed from 1.0277 down to 1.0211 back up to 1.0281.
The Japanese yen remained strong against most of its major counterparts as its safe haven status is boosted by euro zone debt concerns. EURJPY dropped to a fresh month-low of 103.39. USDJPY fell to a session low of 76.84 before easing in to a range.