Forex News Review – Euro rebounds on improved sentiment after Italian yields ease

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The euro strengthened across the board in European trading as sentiment improved slightly after a successful Italian treasury bill auction that was less expensive than was expected. Italian bond yields slightly eased from record highs hit on Wednesday. Meanwhile euro was further boosted after the naming of the new Greek Prime Minister, Lucas Papademos which helped bring some relief to markets as one uncertainty has been removed from the table. EURUSD rose 1.2 percent from a session low of 1.3482 to 1.3643. The Single currency is expected to remain under pressure as the focus turns to the Italian Senate vote tomorrow on a package of debt- reduction measures that is expected to lead to the resignation of Prime Minister Silvio Berlusconi within days.

The British pound rose after the Bank of England announced it kept rates unchanged at a record low 0.5 percent while leaving its 275 billion pound asset purchase program also unchanged. UK gilts edged lower helping lift the pound against most major peers. GBPUSD hit a high of 1.5965 moving up from a low of 1.5889.

The Swiss franc strengthened today amid investor demand for the safe haven to protect their assets from the region’s sovereign debt crisis. The Swiss National Bank is ignoring demands from executives and politicians to further weaken the franc .The SNB set a cap of 1.20 francs to the euro on September 6 in an effort to curb franc strength. So far euro has remained above that floor despite the recent turmoil. EURCHF fell 0.7 percent so far today to 1.2293 from the Asian session high of 1.2383.USDCHF fell to 0.9023 from 0.9138.

The Canadian dollar strengthened against its US counterpart in the European session, gaining 0.8 percent as risk appetite picked up today and commodity prices rose. Crude oil which is Canada’s major export gained over US$2 in European trading, which helped boost the commodity-linked CAD. Also, Canada’s trade balance improved much more than expected, with the trade surplus widening to CAD$ 1.2 billion from a deficit of CAD$0.5 billion which was expected to remain unchanged. USDCAD fell to 1.0175 from 1.0265. Meanwhile Canada’s major trading partner, the United States also reported a better than expected trade balance.

The Japanese yen weakened against the euro in the European trading session. EURJPY bounced off a four-week low of 1.4.71 touched early this morning to rise to 105.86 as euro rose across the board on improved risk appetite. Yen also weakened against sterling and the Australian dollar as improved market sentiment reduced the safe haven demand for yen. USDJPY however hovered around its lowest level since the BOJ October 31 intervention, touching as low as 77.58.