Forex U.S. Review – Euro rises after EU summit expands EFSF rescue fund powers

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Forex News – USD pulls off from 3 year low as Euro closes in on recent highsThe Euro advanced against the Dollar to a two-week high on signs European officials have a plan to resolve fiscal problems in heavily indebted euro zone countries, easing concerns of default by Greece. French President Nicolas Sarkozy announced that EU leaders have agreed to expand the European Financial Stability Facility rescue fund to help Euro zone economies sooner before they are close to default, would offer loans to weak countries at lower rates and longer maturities.The plan also includes recapitalisation of banks and also being able to intervene in the bond market in order to halt contagion. EURUSD rose over 250 pips to 1.4416 from the U.S. session open of 1.4172.



Sterling surged to a five-week high against the Dollar on the resurgence of risk appetite, as investors confidence was boosted by a draft conclusion from the EU summit which signalled the Euro zone would solve its debt problems. GBPUSD rose to 1.6322 from the open of 1.6169. However, against the Euro, the Pound traded lower since the Single Currency was on a roll after the news of the EU summit draft. EURGBP rose to 0.8763 to 0.8835.



The Yen gained against the Dollar, as risk aversion dissipated after news of a plan to use the European bailout fund to make cheap loans to Greece and other heavily indebted governments in the euro zone. USDJPY fell to a four-month low to 78.33 from 78.85, its lowest since March 17.



Swiss Franc slightly edged higher than the Dollar due to some safe haven buying by investors who are playing it safe ahead as uncertainty still exists over what will come out of the Greek debt deal that the EU summit proposed. USDCHF was on a downtrend most of the session, from the open of 0.8218 down to a low of 0.8157. The Dollar very briefly spiked up to 0.8206 immediately after the EU summit draft proposal was released but soon fell again.



The Canadian dollar rallied against the greenback in the U.S. trading session to its strongest level in more than 3-1/2 years as risk aversion dissipated following the release of a draft conclusion from the EU leaders summit today which includes some sort of an agreement to deal with the Greek debt crisis and contagion. USDCAD fell to 0.9422, the lowest level since November 2007. The Canadian dollar began strengthening over the US Dollar since July 12 and even more after the Bank of Canada signaled it was closer to raising interest rates when it used surprisingly hawkish language in its rate decision statement.



Gold fell during the U.S session, moving well below Tuesday’s all time high following a leak on news that a proposal to give Europe’s financial rescue fund new powers to fight debt contagion drew investors to riskier assets at the expense of safe havens. Spot gold fell to a low of $1,585.03 from the session open of $1,599.11.