The euro rebounded slightly to the upside today as slight wave of optimism spread in the market after Spain and France were able to sell bonds with yields declining from records, which eased jitters and rising debt concerns in the market, and pressured the U.S. dollar to decline slightly.
Yesterday, major central banks intervened and supported markets to rebound after they cut the cost of borrowing U.S. dollar, which in result supported banks to avoid a credit crunch as European banks were unable to obtain U.S. dollar; however, after this act reduced the pessimism in the market, Spanish and French bond auctions came to support the sentiment, especially when France is threatened to loose its top credit rating.
Markets are very volatile and fluctuated heavily earlier today, as manufacturing sectors in Europe and China contracted further in November, which added to concerns that the global slow down and the escalating debt crisis could push the euro-area region into another phase of recession, while China, which used to lead growth and recovery, is threatened now to loose momentum as the economic situation is continuously worsening and remains highly uncertain.
The U.S. dollar index (USDIX) opened the session today at 78.33, recording the highest at 78.52 and the lowest at 78.13, and is currently hovering around 78.18.
The euro gained strength against the U.S. dollar despite the confirmed contraction in the manufacturing sector in November, as Spain and France auctioned bonds successfully and also as Germany and the United Kingdom showed their willingness to support the euro-area region to resolve the debt crisis, where Germany agreed to the option of boosting the International Monetary Fund powers to aid vulnerable countries, while the United Kingdom explained that it will cope with any changes in the treaty in case these changes could help European lawmakers to resolve the two-year debt crisis.
The European manufacturing performance retreated to 46.4 from the previous of 47.1, while the German manufacturing sector shrank to 47.9 from 49.1. In addition, the Chinese manufacturing sector contracted beyond expectations to 49.0 from 50.4.
The EUR/USD pair is trading now around $1.3495, after recording the highest at $1.3502 and the lowest at $1.3416, noting that the pair started the day at $1.3445.
The Swiss franc also gained strength against the U.S. dollar, especially after growth slowed less than expected and despite the downbeat PMI manufacturing, where after opening the session at 0.9123, the USD/CHF pair recorded a high of 0.9150, and then reversed to a low of 0.9084, and traded moments ago around 0.9091.
The GBP/USD pair appreciated, recovering the losses incurred earlier today after the better-than-expected PMI manufacturing index, which has advanced to 47.6 from 47.4, beating median estimates of 47.0. The pair trades now around 1.5725, and recorded a high of 1.5744 and a low of 1.5636 after the opening of 1.5700.