Pessimism returned to the market with the start of this week as one of the Greek unity government's leaders refused to provide a written acceptance for the second bailout deal, while the U.S. Super Committee members are still split over the budget-cut plan, in the time Moody's threatens the French top credit rating.
The U.S. dollar gained the most today, as investors tend to avert as much risk as possible, which reflected negative demand for the high yielding currencies including the euro, the sterling pound and the Canadian dollar, where all these currencies lost strength against the U.S. dollar as renewed fears and rising debt concerns dominated the markets with the start of this week.
The U.S. dollar index (USDIX) opened this week at 78.04, and recorded a high of 78.51 and a low of 77.96, and is trading in the moment around 78.43.
The euro lost strength against the U.S. dollar, after the leader of the New Democracy Party, Antinos Samaras refused to sign a written acceptance of the second bailout deal required by international lenders (European Central Bank, International Monetary Fund and the European Union). Greece should provide this acceptance in order to become eligible from the next tranche of 2010's bailout package.
The EUR/USD pair opened this week in the Asian session at $1.3509, and set the highest at $1.3537 and the lowest at $1.3429, and is currently hovering around $1.3444, extending the losses incurred during the past week.
Pessimism spread in the market after the downbeat refusal shocked international lenders, where Greece could run out of funds as soon as January without any financial aid; however, the leader explained that he is committed to the bailout deal and he supports the Greek budget plan, which he considers adequate without signing a written acceptance of the bailout deal.
The euro extended the losses after Moody's statement that rising yields on French bonds along with the global slowdown in growth in addition to the faltering recovery could affect the French debt rating negatively.
The International Monetary Fund (IMF) managing director, Christine Legarde said in a statement that Hungary called for a financial support from the IMF and the European Commission, which renewed fears that the debt crisis is spreading quickly and now lights are focused on European lawmakers to implement the plan approved earlier to aid the euro zone and prevent the contagion from spreading further.
The U.S. super committee failed to quell rising jitters and provided nothing to the market, which supported pessimism to prevail despite some cheerful decisions and fundamentals from the euro zone today, where the Committee is expected to find a budget plan before Wednesday, because by that time a previously set plan worth $1.2 trillion of cuts will be automatically activated over the coming 10 years.
The euro zone released the current account figures today, showing that the deficit narrowed to 2.5 billion euros from 7.2 billion euros, while the non-seasonally figure showed that the euro zone was able to achieve a surplus of 0.5 billion euros compared with 5.9 billion euros previous deficit.
With the lack of fundamentals from the United Kingdom today, the sterling pound followed the general sentiment in the market and lost strength against the U.S. dollar, where the GBP/USD pair trades now around 1.5638 after the opening of 1.5779. The pair also recorded a high of 1.5795 and a low of 1.5634.
The Japanese yen continue the upside journey against the U.S. dollar, where after the Bank of Japan intervened in the currencies market and devalued the strengthening yen, the currency returns to gain momentum against the U.S. dollar, which indicates that the Bank of Japan could intervene soon in case the pair remains weak.
The USD/JPY pair opened this week at 76.82, and recorded the highest at 76.95 and the lowest at 76.74 and is trading in the moment around 76.75.