Forex US Review – Euro weakens as EcoFin meeting disappoints so far

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The euro was weaker overall today against the dollar as the European Finance Ministers meeting in Poland did not provide and concrete solutions to the eurozone debt crisis so far. German chancellor Angela Merkel firmly rejected a common euro zone bond, and Finnish Finance Minister Jutta Urpilainen said it was unlikely any agreement on collateral would be reached. Investors preferred not to hold on to the euro over the weekend and the sell off brought the EURUSD pair down to 1.3780 by the end of the US session from an earlier rally to 1.3844. Meanwhile a stronger dollar pushed the euro down after a better than expected US data by the University of Michigan preliminary index of consumer sentiment.

GBPUSD was little changed in the US session as the pound has been under pressure due to speculation that the Bank of England will expand quantitative easing, which will result in weakening of the currency. Yesterday BoE policymaker Martin Weale, who told Reuters the risks of a double-dip recession had risen and that he would consider more quantitative easing if inflation looked set to undershoot the central bank’s target. Investors preferred not to hold on to large position over the weekend and volumes were light. GBPUSD opened the session at 1.5811 and touched lows of 1.5768 and hit highs of 1.5837.

The Canadian dollar gained to the strongest level in two weeks on positive domestic economic data. A government report showed better than expected purchases of Canadian securities by foreign investors which helped boost the currency’s attractiveness. USDCAD fell to 0.9794 from the session open of 0.9835.

USDCHF rose as the dollar gained broadly after data showed consumer sentiment in the United States rose in early September. The Thomson Reuters/University of Michigan’s survey showed consumer sentiment edged up to 57.8 from 55.7 in August, creeping back up after a nearly three-year low last month and stronger than economists’ expectations. The Swiss franc weakened as the USDCHF pair rose to 0.8776 from a session low of 0.8718.

The yen extended declines against the dollar after the Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 57.8 this month from 55.7 in August, higher than the forecast reading of 57. USDJPY bounced from the US session open of 76.68, after having fallen in the previous session, to hit a high of 76.96.

Gold rose the most in a week on renewed concern that the eurozone debt crisis will threaten other economies, boosting demand for the safe haven precious metal. European finance ministers ruled out efforts to prop up the faltering economy and gave no indication of providing aid for lenders at the EcoFin meeting in Poland today. Spot gold rose from the New York open of $1,787.15 to a session high of $1,821.67.