Forex News Review – Canadian dollar gains after CPI; euro steady before EU Summit

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EURUSD declined early in European trading on concerns over the upcoming EU summit this weekend and the divide between policy makers which could hamper progress in tackling the euro zone debt crisis. German Ifo business sentiment data released today showed the index dropped in October for the fourth month in a row, which hurt the euro further. EURUSD soon bounced off the low of 1.3703 to climb to 1.3837, with the overlapping US session open helping the rise and traders short-covering ahead of an uncertain weekend EU summit. The euro remains vulnerable and any disappointing news could cause it to plunge on Monday.


GBPUSD opened in Europe at 1.5802 with a brief dip then began its ascent after better than expected UK data on public sector borrowing, which was less than forecast. Cable continued to rise and broke past key resistance levels to shoot up to a six-week high, hitting 1.5916, boosted by large orders from big firms. Sterling also gained against a broadly weaker euro, and EURGBP fell to a fresh two-week low of 0.8668.


USDCHF remained close to one-month lows after falling sharply in the Asian session. The Swiss franc holds firm on safe haven demand amid uncertainty surrounding the outcome of the EU summit and disagreements between policy makers on crafting a crisis solution. USDCHF opened at 0.8883 and formed into a range for the session. EURCHF retraced after hitting strong support levels and bounced up to 1.2310 to move away from the currency cap that the SNB set, a floor of 1.20 francs to the euro, so the pair can no longer pass below that otherwise the central bank will intervene.


USDJPY fell dangerously close to August’s record low, plummeting to a one-month low of 76.10. Demand for safe haven sent the yen higher amid concerns over the euro zone debt crisis. Dollar accelerated its drop when the overlapping US session opened at 1100GMT and making their daily fix and adjusting orders. EURJPY remained in a 105.00-106.00 range it has formed since the past four days.


The Canadian dollar gained strength today against its US counterpart after Canada’s annual inflation rate accelerated more than expected in September. CPI increased 3.2 percent in September from a year earlier, compared with a forecast for 3.1 percent and an August rate of the same 3.1 percent. This may give some indication of whether the Bank of Canada might raise interest rates soon. Usually higher inflation leads to a rate hike. Such expectations pushed the Canadian dollar higher, putting USDCAD under pressure and fell to 1.0098 versus and earlier high of 1.0186.