The major even, leading the Forex market this week, was the summit of the European Union leaders on June 28–29. The weakness of the euro, which was prevailing for the most part of the week, was erased by the end of the meeting.
Not many market participants believed that the summit would bring any noticeable result and that depressed mood pressured the euro to the downside. The skepticism made the positive reaction even stronger when it became evident that European chiefs are ready to take actions. It looks like the lawmakers managed to address both short-term and long-term problems. In a short term, the pressure on banks and governments, especially those of Spain, should be lessened. In a long term, there were plans for integration of banking and financial systems. The suggestions should yet be ratified by the member of the EU, but at least some necessary steps were taken. The positive news after a long time of continuous negativity put markets in a state of euphoria and most risky assets completely erased any losses that were made this week.
The moves of the euro nicely reflected traders’ sentiment. It was gradually trailing down for almost the whole week, but jumped on Friday, erasing all losses. The weekly gain against the yen was very limited, but the advance versus the dollar was more substantial. The question remains: will the European currency be able to keep its gains? A correction is likely after such huge moves, but the size of the potential retreat is hard to predict.
EUR/USD climbed from 1.2548 to 1.2663 this week. EUR/JPY dropped from 100.92 to 98.32 during the week, but rebounded and closed at 101.06. EUR/GBP was up from 0.8055 to 0.8063, erasing the earlier drop to 0.7983.
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