By: Nikoletta Panteli from easy-forex
EUR/USD
The Euro fell at the start of the new week against the US Dollar following the G20 meeting. Shares turned negative and risk aversion dominated Monday’s markets after the G20 countries rebuffed calls to boost the eurozone’s resources. During the meeting, the G20 leaders said Europe’s bailout fund must be strengthened to stop the eurozone sovereign debt crisis from spreading. The pair opened at 1.3466 and dipped as low as 1.33.66. Credit rating agency Standard & Poor’s also weighed on risk appetite after it cut Greece rating to “selective default”. S&P said that Greece’s deal with its private creditors, which amounts to a 53.5% write-down, resulted in the downgrade. Focus now turns to the size of the European Central Bank’s liquidity offer to European banks on Wednesday. Expectations that 500 billion euro will be borrowed by the eurozone banks in the LTRO helped risk sentiment in the market to recover. The pair rebounded on Tuesday ahead of Wednesday’s long-term refinancing operation (LTRO) with the ECB to 1.3462. Economic data showed economic sentiment in the eurozone increased higher than expected while inflation and unemployment figures are also expected this week.
GBP/USD
The British Pound depreciated versus the US Dollar on the first day of the week, weighing on concerns over developments on Greece and the eurozone. Expectations for further quantitative easing by the Bank of England have started to fade following last week’s inflation report which showed that inflation forecasts accelerated by more than expected. The stronger Dollar combined with a heightened risk aversion in the market pushed the Sterling as low as 1.5810 on Monday, from 1.5902; a decline of 0.6%. On Tuesday, the pair recovered to trade as high as 1.5875 ahead of an injection of cheap funds by the European Central Bank which may support risk appetite. Attention shifts to this week’s consumer confidence, manufacturing PMI and mortgage approvals data from the UK.
EUR/JPY
The single currency rose to a nine-month high versus the Japanese Yen at the start of the new week hitting 109.99. Later the Yen recovered supported by aggressive end of month buying by Japanese exporters, while the euro dipped ahead of a liquidity injection by the European Central Bank. The pair plummeted as low as 107.19 and on Tuesday it recovered to 108.74. The Yen is expected to remain weak following the Bank of Japan’s decision this month for a loose monetary policy in order to support the country’s ailing economy. The BoJ said that it remains ready to act in the currency markets in order to defend its currency as a strong Yen has a negative effect on the country’s exports.
EUR/GBP
The single currency declined against the British Pound this week. The G20 meeting and Greece’s downgrade by rating agency Standard & Poor’s weighed on the single currency. The market will be dominated by developments over the new liquidity injection to the European banks by the European Central Bank. On Monday, the pair opened at 0.8477, rose to 0.8486 but later slid to 0.8440. On Tuesday the pair recovered supported by an improved risk sentiment in the market and jumped to 0.8488.
USD/CHF
The greenback was stronger against the Swiss Franc as the week commenced. On Monday, the pair opened at 0.8943 and rose as high as 0.9010 before falling again to 0.8950 on Tuesday. Focus turns to this the GDP announcement expected this week and any signs of contraction of Switzerland’s economy may add fuel to speculation of an intervention by the Swiss National Bank (SNB). Speculators argue that the SNB may step in the currency market to stop the franc from rising further. The SNB has set a floor at 1.20 for the Euro versus the Swiss Franc, and the pair is trading close to that.