EURUSD rose to a 3-1/2 week high lifted by risk appetite as market sentiment improved on hopes that the European debt crisis will be tackled soon based on the German-French plan to recapitalise banks and contain the sovereign debt crisis. Slovakia is expected to pass the vote to enhance the EFSF rescue fund. By increasing the powers of the 440 billion-euro EFSF, the fund would be able to buy the debt of stressed euro-zone countries as well as provide aid to troubled banks. Meanwhile, surprisingly better than expected euro zone industrial production data today helped boost the euro. A broad dollar sell-off also lifted euro.
GBPUSD rose despite disappointing jobs data. UK unemployment rose to the highest in 15 years to 8.1 percent. Sterling strength was a result of a huge sell-off in the dollar because traders were long too many USD positions which they had to reposition, hence weakening the greenback and lifting the pound. Overall risk-on sentiment also helped boost sterling, which took direction from the soaring euro. GBPUSD gained over 200 pips from the open of the European session to hit an intra-day high of 1.5783, the highest since September 16.
EURJPY opened in Europe at 104.57 and surged to 106.57, the highest in four weeks, amid a broad euro rally on optimism of a euro zone debt crisis solution soon. Technicals also helped lift the pair as traders were over short euro positions and had to reposition. Meanwhile the dollar which had been stuck in a tight range against yen, soon broke the range, initially dipping to 76.30 but soon bounced to 76. 98.
The Swiss Franc strengthened against the dollar for the first time this month as demand for the safe haven greenback fell today. The franc is no longer perceived as a safe haven since the SNB pegged it to the euro in September. USDCHF tumbled over 170 pips to 0.8935 from 0.9105. The Swiss currency also gained against the euro as investors no longer expect the SNB to readjust the cap of 1.20 francs against the euro. Last week there was growing speculation that the bank would further weaken the franc and raise the cap to 1.30 francs to the euro. EUROCHF fell to 1.2336 from an early session high of 1.2417.
The Canadian dollar gained against its US counterpart as risk appetite gave a favoured environment for commodity-linked currencies like the loonie. Crude oil gained over $2 on the day and this helped lift the Canadian dollar as Canada is a major oil exporter. Overall USD weakness boosted CAD. USDCAD dipped to 1.0150 from 1.0281.