The Euro fluctuated against the Dollar in the U.S. session, first rising to a high of 1.4094 then falling to 1.4018 before rising again, almost range bound. The Single currency is expected to be volatile in the next few days in the build up to the Euro zone emergency summit on Thursday in Brussels where EU leaders will attempt to finalize a second round of financial aid for Greece worth 110 billion Euros. Until now European officials and bankers remained divided over steps to keep the fiscal woes of heavily indebted nations from spreading.
Sterling fell over 100 pips against the Dollar from a high of 1.6105 down to 1.6004. There are not so many fundamental reasons to buy the Pound today and its direction was based on events elsewhere, mainly affected by the Euro’s direction. General risk aversion kept the Pound weak as sentiment stayed shaky on the view that a fragile economy will ensure UK interest rates stay low for a prolonged period.
The Swiss Franc moved away from its record levels against the Dollar reached early in the Asian session today lifted by investors unwinding short positions to take profit. Some investors believe that the U.S. failure to lift the debt ceiling limit has not led America’s creditors to lose confidence yet. USDCHF opened the session at 0.8174 and rose to a high of 0.8192.However, the franc is expected to remain a strong currency for a long time as long as the Euro zone credit crisis still lingers.
The Canadian Dollar was weak against the US Dollar in the session, as risk aversion swept through the markets over fears of a sovereign debt default in Europe and the United States. USDCAD rose to a high of 0.9634 from a low of 0.9583. Meanwhile, falling crude oil prices also dragged down the Loonie,which is a commodity-linked currency, as fears of a U.S. debt default increased market jitters and increased speculation that the International Energy Agency (IEA)might release stock from its emergency reserves. Investors are focused on tomorrow’s Bank of Canada interest rate announcement, though it is expected to keep rates unchanged at 1.00%.
Gold prices surged to a new record high on fears the debt problems in Europe and the United States may spiral into a global crisis. Gold is traditionally a safe haven investment in times of crisis and is expected to stay well supported until a real and convincing solution emerges from the emergency EU summit that takes place on Thursday. Additionally, there are concerns over the US debt limit, as the August 2 deadline approached for an increase in the statutory $14.3 trillion borrowing limit. Spot gold hit the all-time high of $1, 607.18 from a low of $1,595.83.
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