EURUSD advanced higher in European trading by dismissing the negative news that Moody’s cut Spain’s credit rating yesterday by two notches to A1 from Aa2. There is optimism ahead of the EU Summit this weekend that some kind of progress will be made to tackle the euro zone debt crisis. However, of expanding the EFSF were crushed after a report saying the rescue was to be boosted to 2 trillion euros was denied by an EU official who said it was not true. Later in the session a German Finance Ministry spokesman said the EFSF will not be raised beyond the 440 billion euros already approved nor will Germany’s participation rise beyond 211 billion euros. The euro dipped slightly as the statement was released. EURUSD opened Europe at 1.3815 to rise to 1.3866 but fell to 1.3813 then jumped to 1.3868 after US data showing housing starts rose more than expected in September, up 15 percent from August, the most since April 2010.
GBPUSD fell sharply up to the release of the Bank of England October policy meeting minutes which showed that all policy members voted in favour of increasing QE and expanding the Bank of England’s asset-purchase program. Cable tumbled to 1.5710 from 1.5806 open price but later rebounded to 1.5833 following the rise in EURUSD as market sentiment was up today.
EURCHF had a strong rally to rise to a 5-month high as euro strengthened across the board in European trading. What gave an extra lift to the pair was speculation that the Swiss National Bank was to lift the EURCHF floor to 1.2500 from 1.2000.
USDJPY opened in Europe at 76.73 then traded in a range. EURJPY moved upwards hitting a high of 106.52 following the overall rise in euro today.
The Canadians dollar was choppy against its US counterpart as the the commodity price-sensitive CAD initially was stronger due to elevated crude oil prices that rose above US$88 a barrel in European trading. Oil is Canada’s major export. USDCAD fell to a session low of 1.0084 then rebounded to 1.0118 before revisiting the session low again after the Canadian dollar regained strength following better than expected US economic data on housing starts. This improved risk appetite in the risky loonie as the US is Canada’s major trading partner. An additional 658,000 homes were built in the US in September, versus the expected 590,000.