Forex recouping the market trends

Monday, April 12, 2010

The Euro surged to the highest level in more than three weeks against the U.S Dollar after European governments offered Greece a rescue package worth as much as €45Bn ($61bn) at below-market interest rates.

Finance Ministers of the 16-nation single currency bloc have agreed to offer as much as €30bn in three year loans, at around 5% interest. This is much lower than current borrowing costs facing the debt-stricken nation, with the yield on Greek government debt rising to a record high of 7.5% last Thursday. The aid package also involves the International Monetary Fund, which will provide an additional €15bn. "The Eurogroup is confident that the determined efforts of the Greek authorities and of its European partners will allow to overcome the fiscal and structural challenges of the Greek economy," an E.U. statement said.

Following the release of the news in the forex online market, the EUR rose 1.2% to strike a high of $1.36906, the highest price for the single currency since March 18th. This unexpected jump comes a few days after the single European currency dropped to within one cent of an 11-month low against the greenback, last Thursday. It rose 1.1%, the most since March 31, to 127.19 yen. The Euro also managed to regain all of last week’s losses against the British Pound. Following the news of a “Greek Bailout”, the EUR/GBP appreciated 0.50%- jumping from last Friday’s closing price of 0.87802 to a high of 0.88241, this morning.

The E.U. decision follows a nightmare week for the Greek administration, which saw borrowing costs soaring to a record high, while international ratings agency Fitch lowered the country's credit rating on Friday to 'BBB-' from 'BBB+' with a negative outlook.

For a second straight week, the British Pound climbed against the U.S dollar, as U.K producer prices jumped in March by more than the market has predicted, in the largest increase for since November 2008. PPI Input soared a record 3.6% between February and March, versus an expected increase of 0.6%, boosted by the rising cost of petroleum products. Britain’s Office of National Statistics also reported that the PPI Output increased above expectations, rising 0.9% for the previous month, and 5% from a year earlier. This monthly rise was more than double the market forecasted increase of 0.4%, adding signs that Britain’s economic recovery is gathering speed. The GBP closed on Friday at $1.53692, up 0.598% from the day’s opening price of 1.52778, and up 0.68% from the week’s opening price of $1.52654. In this morning Asian session, the GBP/USD extended above the 1.54000 mark, to hit a 7-week high of 1.54833, before pulling back to the 1.5435 area.

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