The euro strengthened against the U.S. dollar and the sterling pound with the start of this week, despite the downbeat performance of services sectors in the euro-area region, where investors are looking forward to the European Summit this week with hopeful eyes that European leaders will finally implement the measures needed to tackle the two-year debt crisis once and for all.
The Italian Cabinet added more optimism to the market after approving the new austerity and growth package, which eased jitters and rising debt woes with hopes that the Italian technocratic government will be able to bring the Italian deficit to zero by 2013, which in result means that Italy could cope with the large amount of debt and will not follow Greece, Ireland and Portugal's steps into deep crisis.
Moreover, the European Central Bank is expected to cut the key rate on Thursday in order to support growth and maintain financial stability. The bank is also expected to add more measures and to reactivate loan programs with longer maturities in order to ease market tension and the strain on the financial sector.
The French President, Nicolas Sarkozy and the German Chancellor Angela Merkel are to gather in France today to negotiate the plan required to reach for a closer fiscal integration among the euro-area nations, which in result could support policy makers as well as the European Central Bank to provide further help to the entire union, which will become more flexible for them to act timely and more accurately.
The U.S. dollar reversed slightly to the downside after fears over European collapse eased, where the USDIX - U.S. dollar index- after opening this week at 78.52, retreated to a low of 78.35, and is currently trading around 78.42, after setting the highest at 78.64.
The EUR/USD pair on the other hand gained some strength, where after the opening of $1.3418, the pair recorded the highest at $1.3460 and the lowest at $1.3394, and is currently trading around $1.3442.
The sterling pound also appreciated against the U.S. dollar, especially after the better-than-expected performance of the services sector in the United Kingdom, noting that the United Kingdom depends mainly on the services sector rather than the manufacturing sector.
The GBP/USD pair started this week at $1.5622 and recorded the highest at $1.5662 and the lowest at $1.5583, and is currently hovering around $1.5647.