The European common currency advanced against majors after the International Monetary Fund (IMF) said that it is planning to expand the lending capacity to $1 trillion from the current $385 billion toprotect the global economy fromthe negative consequences of the European debt crisis, according to an official at a Group of 20 nation.
The announcement supported the sucessful bond auctions made by Germany and Portugal to improve the sentiment in the market, and the euro to extend the gains against the U.S. dollar.
Germany managed to sell two-year bonds at lower yields and stronger demand, where the government sold 3.44 billion euros of 2-year notes with an average yield of 0.17% from 0.29% recirded in the prior auction, while the bid-to-cover ratio improved to 2.2 times compared with the previous 1.43 times recorded December's auction.
Portugal also auctioned 1.25 billion euros, 754 million euros and 496 million euros of 11-, 6- and 3-month bonds respectively.
Regarding the European fundamentals released today, the euro area construction output surged 0.8% in November from the prior 1.4% drop.
On the other hand, the euro surrendered some of the gains after Fitch Ratings said six euro area nations, namely Spain, Italy, Ireland, Cyprus, Belgium and Slovenia, are under review for a possible one to two notches cut by the end of the current month.
Also, the German government revised down growth expectations for 2012 to 0.7% from 1.0% while said exports growth is expected to slow dramatically to 2.0% versus 8.2% in 2011.
Concerning the EUR/JPY pair, it rebounded for the second day to trade around 98.45 after recording a high of 98.58 and a low of 97.66.
The trading range for the day is expected among the key support at 95.60 the key resistance at 98.80.
Moreover, the dollar index, which tracks the dollar's movement versus a basket of major currencies, fell sharply for the third consecutive day with the improvement the sentiment, which sent the index to touch a low of 80.59 compared with the day's starting level of 81.11.
Moving to the GBP/USD, the pair rose on the daily charts, following the general trend in the market.
Data from the U.K. gave slight support to the pair as jobless claims for the month of December recorded a drop to 1.2 thousands compared with 3.0 thousands in November, which was revised down to 0.2 thousands, ILO unemployment for the three months ended November climbed to 16-year high to 8.4%, exceeding both prior and median forecasts of 8.3%.
The pair is currently hovering around 1.5365 after recording a high of 1.5387 and a low of 1.5325, while the trading range for today is among key support at 1.5125 and key resistance at 1.5555.