Euro Recovers, Risk Appetite Dominates Markets

The euro rose against its major counterparts and Asian equities turned positive after the EU summit. EU leaders agreed on fiscal compact designed to prevent overspending in the eurozone and stop the debt crisis from spreading. Only UK and Czech Republic refused to sign the compact. The agreement boosted risk appetite in the markets as this is a significant move towards a ‘fiscal union’. Optimism was further boosted after the Greek Prime Minister Papademos said that the negotiations with the bondholders made a significant progress raising hopes for an agreement by the end of this week. Italy’s bond auction was successful yesterday after the Italian treasury managed to sell 7.5 bln euro worth of bonds at lower yields but Portugal’s 10-year government bond yields reached 17% raising fears that Lisbon may be the next to seek a second bailout. Eurozone unemployment rate is expected later today. Versus the greenback, the euro jumped as high as 1.3198 today from 1.3076.

The US dollar is under pressure today as risk appetite starts to recover. Against the Japanese yen, the dollar dipped to a three month low at 76.17 from 76.75. The yen’s rise increased concerns that it may hurt Japanese exports adding more on speculation that the Bank of Japan may intervene in the currency markets to stop the yen from rising further. Versus the Swiss franc, the dollar fell to 0.9130 from 0.9209.

The British pound rose against the greenback on expectations Greece may reach an agreement with its private creditors by the end of the week. The pair climbed to 1.5754 from 1.5654.
Oil prices rose to 99.36 dollars a barrel today from 98.40. Gold rallied to 1740.83 dollars an ounce from 1716.19. Silver edged higher to 33.79 dollars an ounce from 33.04

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