Markets rebounded to the upside after the successful Spanishbond auction, which witnessed strong demand and lower yields, and also after the improved confidence in Germany, where investor's appetite for risk improved and tension eased in the market, supported by the details provided by European finance ministers regarding the International Monetary Fund role in fighting the crisis.
The Spanish Treasury sold 3-month and 6-month bills today on strong demand and lower yields, where Spain sold as much as 3.7 billion euros of 3-month bills on 1.735% yields, down from 5.11% an auction earlier, while demand for the Spanish debt was 2.9 times the quantity offered compared with the previous of 2.8 times.
In addition, Spain also sold 1.92 billion euros of 6-month bills, producing yields of 2.435% compared with the prior of 5.227%, while the bid-to-cover ratio was 4.1 times down from 4.9 times recorded in the November auction.
Spain sold bonds more than targeted after witnessing lower than expected yields, where the Treasury sold as much as 5.62 billion euros compared with the targeted range of 3.5 to 4.5 billion euros.
After the successful bond sale, the U.S. dollar declined sharply after jitters eased in the market, especially when eyes are focused on Italy and Spain, which are expected to be the next victims of the crisis in Europe.
The euro benefited from the good news; where the currency extended the upside move seen earlier to currently trade around $1.3064 against the U.S. dollar. The EUR/USD pair opened the session today at $1.2998 and recorded the highest at $1.3089 and the lowest at $1.2991.
Germany released the IFO confidence survey for December today, where the figures showed an improvement in the German confidence, which in result supported markets to rebound and extend the relief rally and supported the euro itself to recover some of the losses incurred earlier.
The U.S. dollar index (USDIX) declined sharply after the opening of 80.37, where the index hit a low of 79.85 after reaching the highest at 80.38; however, the greenback trades now around 79.91.
The GBP/USD pair also inclined sharply after optimism spread in the market, where the pair after the opening of $1.5496 recorded the highest at $1.5648 and the lowest at $1.5492, and is currently hovering around $1.5632.
The high yielding currency, the Australian dollar gained the most against the U.S. dollar, where once we track optimism in the market, the first pair responding to the positivity will be the Australian dollar unless other factors are affecting the pair.
The AUD/USD pair opened the session today at $0.9893 and recorded the highest at $1.0001 and the lowest at $0.9892 and is hovering in the moment around $0.9992.