The EUR/USD is trading basically flat early into the U.S. first session of the week with the euro receiving a support after Spain’s government announced positive unemployment data of an increase of 59,400 compare to 77,500 last month.
Currency wars continue as the Bank of Japan continues to attempt to verbally lower the yen while the euro catches a bid higher as sentiment strengthens that the euro zone is indeed stabilizing sending the EUR/JPY to nearly a 3 year high, the pair has not been seen this high since May of 2010.
During the overnight deepening concerns over Spain’s economic outlook and bailout concerns reversed the EUR/USD pair sending the euro lower against the U.S. dollar.
The EUR/USD continues to remain under pressure as the European Union Summit comes to a close today. Traders were looking for some kind of indication of progress in dealing with the Spanish debt and formal request of a bailout.
Fears of continuing slowdown of economic growth was renewed this week on comments from the International Monetary Fund (IMF) in which the IMF cut global growth outlook and warned it needs to take control of the debt crisis, referring to Spain and Greece.
China’s huge 265 billion yuan ($42.1 billion) liquidity injection last night as well growing fears of uncertainty over both Greece and Spain debt crisis is helping the U.S. dollar gain strength as sentiment continue shift away from risk currencies to the safety of the U.S. dollar.
The EUR/USD currency pair jumped to over a 2 week trading high after the U.S. non-Farm Payroll data and improving unemployment rate data was released. Money began to flow away from the U.S. dollar on the news into riskier assets allowing the euro zone debt issues to become secondary.
The saga continues in the euro zone as the single currency continues gain on the U.S. dollar in early trading but remains higher by more than 35 pips in the late morning U.S. session. The euro continues to benefit from reports that Spain could request a bailout as early as this weekend.
Currency traders seeking stable less volatile currency pair are flocking to the U.S. dollar against the Canadian loonie on recent positive U.S. economic data. The U.S. current account deficit shrank more than expected for Q2 falling from $133.6 billion to $117.4 billion, quarter over quarter.
With the growing possibility of the European Union having to inject the full committed amount into Spain’s banking system, more disappointing economic data out of the rest of the continent has tied a lead brick around the already weak euro currency.