With the start of this week, Currencies provided an opening gap and now the improvement seen in the market is only an upside correctional move for currencies to cover the opening gap seen, where the sentiment is still jittery, while fears and rising debt concerns are still evident in the market ahead of the euro-zone finance chiefs' meeting tomorrow.
The opening gap seen in currencies markets was led by the Italian newspaper (La Stampa), which explained that the International Monetary Fund (IMF) was preparing for an aid package worth 600 billion euros for Italy, which supported markets to rebound slightly; however an IMF spokesman denied any discussions with Italy on a financing program, which supported currencies to cover the opening gap seen earlier.
Currencies fluctuated heavily with the start of the session today, especially with the mixed developments from the euro-area region, where today Italy failed to meet the sale-target in the bond auction despite the rising yields, where the Italian Treasury sold as much as 567 million euros of bonds compared with the targeted sale of 750 million euros; however, yields surged to 7.3% and demand was 2.6 times the quantity sold.
Europe remains the main focus in the market ahead of the euro zone finance minister meeting tomorrow, where reports indicated that European leaders have finally found common ground and decided how to leverage the firepower of the European Financial Stability Facility (EFSF) in tackling the debt crisis; however, decisions will be made in the coming two days, when the euro-area finance chiefs are to join the European Union ministers in a meeting on Wednesday.
European finance ministers are to discuss the mechanism of leveraging the European rescue fund in addition to the measures required to provide financial stability, as the ministers are set to adopt new measures to control rising borrowing cost on European indebted nations, while providing governments with credit lines is likely to be discussed too.
Moody's threatened the entire union, explaining that the escalating debt crisis and rising yields could cost European nations their credit rating, as the agency said that credit risks will continue to intensify in the short-term without any quick measures to stabilize markets.
The EUR/USD pair is volatile and fluctuated heavily today between a high of $1.3398 and a low of $1.3272, and was able to cover the opening gap seen, where the pair opened the session at $1.3321 after the closing of 1.3233 on Friday, and is currently trading around 1.3357.
On the other hand, the U.S. dollar fluctuated heavily against other major currencies, where the U.S. dollar was able to gain strength against the Japanese yen, however lost strength against the Australian and Canadian dollar and also against the sterling pound, which rebounded ahead of Osborne's meeting with the parliament tomorrow, as market speculation point at another phase of stimulus in the United Kingdom.
The U.S. dollar index (USDIX) opened this week at 79.20, and recorded the highest at 79.39 and the lowest at 78.75, and is currently trading around 78.96, noting that the index closed the session on Friday at 79.62.
The sterling pound gained momentum against the U.S. dollar and the euro, as the OECD expects the Kingdom to expand 0.5% this year, while next year it will grow further as the Bank of England is expected to add more stimuli to support growth and revive the pace of recovery.
The GBP/USD pair opened today at $1.5484, and reached a high of $1.5594 and a low of $1.5457, and is currently trading around $1.5555, noting that the pair closed in New York on Friday at $1.5435.
The Australian dollar also gained strength against the U.S. dollar, where after the opening gap seen, the AUD/USD pair extended the gains to currently trade around $0.9933, after opening the session at $0.9778. The pair closed the previous session at $0.9700.
The Canadian dollar also extended the gains against the U.S. dollar, where after the opening of 1.0425, the USD/CAD pair reached a low of 1.0322, and is trading in the moment at 1.0338. The pair closed in New York on Friday at 1.0486.
The U.S. dollar extend the gains against the Japanese yen, which temporary excluded the possibility of an intervention from the Bank of Japan, where the USD/JPY pair opened today at 77.58, after closing Friday's session at 77.70. The pair closed the opening gap and trades now around 77.75.