EURUSD had a mixed day as markets were euro-centric and reacted to every little dribble of news that came out. Earlier in the day the euro rose against the dollar after Merkel got all the votes needed to approve strengthening the EFSF through leveraging, which removed one roadblock to negotiations at the EU Summit tonight. EURUSD rose to 1.3974 only to fall to 1.3798 after news that details of the Summit crisis plan will only be decided next week just before the G20 summit and not tonight. Euro soon recovered after EU sources said the 440 billion EFSF fund would be leverage around four times, to 1.0 trillion euros. Also EU leaders announced they reached agreement on a plan to recapitalize the region’s banks. This kept EURUSD supported, rising to 1.3919 on the news.
GBPUSD tumbled 145 pips to 1.5890 from an early US session high of 1.6035 following the drop in the euro, then rebounded along with the EURUSD. Against the pound, euro also rebounded. EURGBP rose from 0.8728 to 0.8857.
USDJPY touched a fresh all time low in European trading at 75.70 but gained 0.8 percent to 76.31 in the US session as the dollar strengthened after US data showing homes sales rose more than expected and durable goods orders rose last month. EURJPY bottomed at a two-week low of 104.74 on news of the delay of release of details of the EU crisis plan until November. Euro then rebounded against yen to climb to 106.06 on news of revamping EFSF to 1 trillion euros.
USDCHF bounced from the NY open of 0.8751 to 0.8858 as the dollar strengthened after US home sales data came out better than expected.
The Canadian dollar strengthened against its U.S. counterpart despite a dovish outlook from the Bank of Canada which released its monetary policy report today following yesterday’s decision to keep rates unchanged at 1 percent. The bank slashed its fourth-quarter growth forecast for Canada. Risk appetite was probably strong enough to support the loonie, as euro was gaining and so were US stock markets. Also US economic data helped lift sentiment, and Canada is a major trading partner to the US. The Canadian dollar gained, USDCAD was pressured down to 1.0045 from an early NY session high of 1.0162.
Gold rose in the US session to a five-week high of $1,726.68 after rising from a session low of $1,701.99. Investors rushed to the precious metal as a safe haven to protect their assets during the uncertainty of the outcome of the EU Summit today.