Euro pares its losses tracking equity gains
The euro recovered from a decade low and an 8-month trough against the Japanese yen and US dollar respectively, lifted by a recovery in equity markets and risk appetite in general. The single currency was initially under severe pressure as forex investors were concerned over the lack of concrete action to tackle the lingering debt crisis.
Despite the fact investors remained unconvinced about policymakers’ ability to put in action measures to tackle the crisis, the single currency managed to rebound after a better-than-expected German IFO survey and rumours of increased support by the European Central Bank.
The single currency was down more than 1.15 percent versus the greenback, and around 1.50 percent against the yen, but pared some of its losses and is now down 0.20 and 0.50 percent respectively. Other higher-yielding currencies such as the Aussie and the kiwi were also under pressure initially, but are now up around 0.40 and 0.35 respectively versus the buck.
Sterling recovers from recent slump
Sterling edged higher on Monday, lifted by a rebound in risk appetite on talk that the ECB may cut its rates to aid the economic recovery.
The pound rose to a 12-day high versus a broadly weak euro and recovered off its 1-year low hit last Thursday against the dollar. Cable is up 0.40, 0.50 and 0.55 percent respectively against the dollar, euro and Swiss franc.
GBP/USD fell to a 1-year low last week, at 1.5328, but has since recovered to 1.5554. Despite the recent rebound, forex investors still see the pair vulnerable, as persistent weakness of the UK economy could lead the Bank of England to embark on further QE, which would put more pressure on the pound.
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