Monday, 21 Jun 2010

EUR/USD Reaches 1-Month High Following Chinese Decision

Following a key currency decision from China, both the euro and Australian dollar rose to respective one month highs against the U.S. dollar. The decision to allow the Chinese currency to rise to a post reevaluation high helped boost investor confidence in the global economic recovery. Furthermore, the decision helped stave off fears that a trade war could erupt between the U.S. and China. As a result, EUR/USD rose as high as 1.2490 earlier this morning, while AUD/USD was trading earlier at 0.8830. EUR/USD has since corrected itself, and is currently trading around the 1.2395 level. AUD/USD has largely remained at its month-high levels.

A slow news day for the rest of the day will likely create a low volatility situation. Traders will still want to pay attention to a speech by the ECB President at 14:30 GMT. Any mention of a euro-zone economic recovery may boost the euro further against its main currency rivals. At the same time, any words of pessimism or caution from the ECB President could lead to USD gains this evening.