At the beginning of a new week, optimism spread in the market after Group of 20 finance ministers and central bankers called on European leaders to tackle the debt crisis with a final plan; however, the optimism turned into pessimism after the German chancellor, Angela Merkel disappointed investors with comments on the closely watched European leaders' summit on October 23.
The euro reversed to the downside after the comments from Merkel's chief spokesman Steffen Seibert at briefing in Berlin, where he said that Merkel significantly indicated that dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won't be able to be fulfilled, while searching for an appropriate solution to end the crisis could take lawmakers more time as she said that it will surely extends well into next year.
Moreover, European leaders will search for tools to tighten the economic and financial policy in the summit and will also discuss the best way for bank's recapitalization and using the European Financial Stability Facility effectively to fund indebted nations, Seibert added.
The U.S. dollar rebounded sharply to the upside after the euro lost strength, affecting other currencies to loose momentum against the U.S. dollar, which gained against all other major currencies as investors' appetite for risky investments retreated after the disappointing comments.
The U.S. dollar index (USDIX) opened this week at 76.61, and fluctuated between a high of 77.08 and a low of 76.43, and is currently hovering around 76.95.
On the other hand, the euro declined against the U.S. dollar after opening this week at 1.3865. The EUR/USD pair also recorded the highest at 1.3913 and the lowest at 1.3765, and is trading now around 1.3790 cutting some of the huge gains recorded in the past week, where the euro set the biggest weekly gains in more than two years.
The sterling pound also lost strength against the greenback, ahead of the inflation data awaited tomorrow from the United Kingdom, with expectations that inflation will reach 4.9% over annual basis.
Concerning the GBP/USD, the pair opened this week in Asia at 1.5826, and set the highest at 1.5847 and the lowest at 1.5730, and trades now around 1.5773.