The euro managed small but noteworthy gains against the US dollar and sterling, after European leaders agreed in principle to create a permanent stability mechanism. The new facility would take effect after the current temporary European Financial Stability Facility expires in 2013 and will help provide a safety net for debt-stricken eurozone members. However, the euro came back under pressure, falling to new all-time lows against the Swiss franc as markets instead focused on the discord between leaders on immediately introducing new anti-crisis measures. The franc’s gains could be tested in the New Year after the Swiss National Bank, which came together for their quarterly monetary policy meeting, held interest rates and warned against the franc’s volatile moves which makes Swiss exports less attractive. After initially coming under pressure from a stronger euro, the US dollar recovered, boosted by surging US factory conditions and another fall in unemployment. Sterling recovered too, from earlier UK unemployment-led losses, thanks to another healthy reading of retail sales which rose for the second consecutive month.
Sterling
After trading close to near two-week lows against the US dollar, sterling found a little support on higher inflation expectations and strong retail sales figures.
US dollar
The dollar turned in a mixed performance after initially coming under pressure from a stronger euro, following eurozone leaders agreeing in principle on a new stability programme. The greenback then managed to recover, and still remains in sight of recent two-and-a-half-month highs on the euro, boosted by another encouraging batch of US data which suggests that the country’s recovery is gathering momentum.
Euro
The euro stabilised, but did manage to post noteworthy gains against the US dollar and sterling, after European leaders agreed to create a permanent stability mechanism. The European Central Bank also announced plans to increase its pool of funds, available to cover losses, as it continues to buy peripheral debt in order to prop up bond markets.
Japanese yen
There was little change for the yen as investors remain cautious towards the under pressure Japanese currency. With little domestic news to excite markets, the yen’s movement are being underpinned by broader market events.
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