ECB Monetary Decision & Greek Agreement Lift Euro

The euro rose today after the European Central Bank maintained its interest rates and Greek leaders managed to reach an accord regarding austerity measures that are required to get the next round of rescue.

The ECB left its benchmark interest rate at 1 percent at a monetary policy meeting today. Mario Draghi, President of the ECB, said in the statement after the meeting that there are “some tentative signs of a stabilisation in economic activity at a low level”, but added:

Subdued global demand growth, the remaining tensions in euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors, continue to dampen the underlying growth momentum.

Draghi also said that Greek politicians resolved their disagreement before an emergency meeting of eurozone finance ministers in Brussels today.

EUR/USD opened at 1.3260 and traded at about 1.3285 as of 15:48 GMT today, while the intraday high was 1.3321 and low was 1.3215. EUR/JPY went up from 102.13 to 102.78.

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US Dollar Drops as Risk Appetite Returns on Greek Deal

US dollar index is lower today, heading down on risk appetite. A Greek debt deal is helping the situation, and Forex traders and investors in various financial markets are feeling better about taking a few more risks in order to invest in higher yielding assets.

Mario Draghi, the president of the European Central Bankconfirmed earlier that Greek policymakers, led by Prime MinisterLucas Papademos, have agreed to an austerity package. The news jolted the euro higher; the EUR/USD currency pair has topped 1.3300.

Other news is also contributing to dollar weakness today. Great Britain has continued its efforts at quantitative easing by announcing that it will pump another 50 billion pounds into the UK economy. US dollar is lower against the sterling.

Additionally, risk appetite is being helped along by the news out of the United States. US unemployment claims dropped by 15,000 to 358,000 in the week that ended February 4, 2012. The news has some hoping that a US economic recovery could be under way. With better news around the world, it is little surprise that the Forex market is seeing risk appetite, and the US dollar is lower without the need for safe haven.

At 15:13 GMT EUR/USD is higher at 1.3306, up from the open at 1.3261. GBP/USD is higher at 1.5846, up from the open at 1.5819. USD/CAD is lower at 0.9943, down from the open at 0.9959.

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Pound Keeps Gains After BoE Boosts Asset Purchases

The Great Britain pound gained today and remained strong after the Bank of England kept its main interest rate unchanged and boosted the asset purchase program as the UK economy continued to weaken.

The BoE kept its key interest rate at 0.5 percent, but increased its program of asset purchases by £50 billion to a total of £325 billion. The Bank said in the statement after the monetary decision:

In the United Kingdom, the underlying pace of recovery slowed during 2011, with activity falling slightly during the final quarter.

The sterling should’ve fallen after the increase of stimulus and the dovish remarks, but proved to be surprisingly resilient.

GBP/USD climbed from 1.5815 to 1.5867 and GBP/JPY rose from 121.81 to 122.55 as of 14:25 GMT today.

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Japanese Yen Drops on Excitement over Greek Debt Deal

Japanese yen is dropping today as Forex traders become excited over the Greek debt deal. Yen is falling as risk appetite rises and low beta currencies find themselves out of favor. This is good news for Japanese leaders, who prefer to see a weak yen.

Greek leaders have agreed to austerity measures that allow a bailout from the ECB and IMF. The news has risk appetite soaring — especially for the euro. Forex traders are interested in yields right now, and the yen is a low-yielding currency. Additionally, yen is being impacted by economic news from around the world: More quantitative easing out of Great Britain, and fewer unemployment claims out of the United States.

Japan is also in the midst of working to reduce its need for dysprosium, a heavy rare earth metal often used in strong magnets and hybrid vehicles. With China squeezing supply, the cost of dysprosium has become almost prohibitive. The Japanese government has decided to spend 5 billion yen in an effort to reduce the need for importing the metal.

For now, the Japanese yen is likely to remain under pressure. However, bad news about the global economy or a new threat coming out of the eurozone could prompt a flight to safety and send the yen higher.

At 16:19 GMT USD/JPY is higher at 77.3319, up from the open at 77.0440. EUR/JPY is higher at 102.8785, up from the open at 102.1550. GBP/JPY is up to 122.6120 from the open at 121.8650.

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