The euro reversed its losses in the U.S. trading session to trade above $.127, gaining 1.2 percent from the bounce off a four-month low. EURUSD had bottomed at 1.2641 in early European trading but steadily rose on short covering throughout the day to hit as high as 1.2793. After a sharp decline in the last four days, the single currency was oversold and due for a correction.

Throughout the week the headline news from Europe put the euro under pressure, making investors nervous about Greece and its possible exit from the euro, which may consequently result in contagion and spread to Spain whose banks are very fragile. Yesterday sixteen major Spanish banks were downgraded by Moody’s.

EURGBP gained 0.5 percent on the day to climb to a high of 0.8077.

EURJPY trimmed some losses and bounced off a three-month low from 100.19 to 101.09.

Yen gained against the dollar on safe haven demand, erasing an earlier loss as USDJPY slipped to 79.00, the lowest since February 17.

GBPUSD tracked the EURUSD higher and rose to 1.5836 from a two-month low of  1.5731.

The Australian dollar was flat against the US dollar this Friday, trading the day between $0.9793 and $0.9882, near five-month lows.

The Canadian dollar declined after earlier making its biggest gains of the week versus its U.S. counterpart. The loonie briefly gained following data showing an increase in Canadian inflation. CPI rose 2 percent in April from a year ago, compared with a 1.9 percent gain the prior month. USDCAD fell after the data to 1.0137 but rose again to 1.0222. Falling crude oil prices, a major Canadian export, weighed on the loonie.

Forex News Review – Euro recovers losses, ends week above $1.27; CAD falls on declining oil

Inflation in Canada rose more than expected in April according to a CPI report released on Friday, driven up by higher gasoline prices.

CPI came in at 2.0 percent, up from 1.9 percent in March. However this matches the Bank of Canada’s target rate.

Core CPI, which is the annual core rate that excludes gasoline, some food and other volatile items, rose to 2.1 percent from 1.9 percent. On a monthly basis, total and core inflation rose 0.4 percent from March.

This helped the Canadian dollar gain slightly against the greenback after the data, though only briefly. The loonie is however off four-month lows reached yesterday.

Chief economist at Laurentian Bank, Carlos Leitao said after the data that the data were in line with expectations and leaves the door open for the Bank of Canada to raise interest rates .

Leito said:

“It does keep the door open, if the Bank of Canada at some point decides it should raise interest rates because of financial stability issues, the fact that inflation is at or slightly above target gives them enough reason to do so. It would have been a problem if inflation starts to fall. The Bank would have a hard time raising rates. But with inflation staying at or slightly above target then if they do decide to move for other reasons they can.”

“We expect the Bank to move this year, in December. There will be a rate hike in December followed by another in January 2013. And the reason for those modest rate hikes is purely from a financial stability point of view, not because of inflation and not because the Canadian economy will be so hot that it requires tighter policy, but because the housing market requires some assistance in making sure it does slow down.”

Forex News – Canadian inflation rate rises in April, within BOC target

Euro extended its decline against the dollar going into the European trading session, falling to a fresh four-month low. EURUSD saw an early bounce to above the 1.2700 level as it would be hard to break the key support level of 1.2600 today. Short-covering ahead of the weekend has contributed to the bounce, seeing the single currency up 0.5 percent during the session.

The economic calendar was light today but euro is vulnerable to headline news from Europe, with Greece and Spain remaining the key drivers behind euro bearishness. Fear of Greece exiting the euro continues to pressure the single currency and will probably continue until more developments from the next elections in Greece in mid-June.

GBPUSD fell to two-month lows of 1.5731 just before the start of the Europe session but was due for a retracement and moved back up above the 1.5800 level. Sterling has been under pressure since the Bank of England earlier this week released a dovish quarterly inflation report and left the door open for more quantitative easing as recent data show that the U.K economic has officially entered a recession.

USDJPY remains on the down-side after the pair plunged over 1 percent on Thursday following disappointing U.S. economic data, reaching a three-month low of 79.12 where it is consolidating. EURJPY bounced off an early three-month low of 100.19 and retraced to 100.99.

AUDUSD fell to its lowest since November 2011in Asian trading, touching 0.9793 and bounced into the European session, gaining 0.8 percent.

Looking ahead, going into the U.S. trading session, there are no important data due on the economic calendar. There will be some focus on the weekend G8 Summit but no economic policy decisions are expected, though U.S. President Barack Obama hopes to promote discussion on steps to resolve the euro zone crisis.

Forex Market Review – Euro bounces above $1.27

Yen has gained strength on the back of the European  debt turmoil leading to safe haven flows to the Japanese currency as the euro and dollar are weighed down. This has caused concern to Japanese Finance Minister Jun Azumi who said on Friday that he is monitoring currency moves with extra care and is prepared to act as appropriate. This hints at readiness to intervene in the currency markets and sell yen to curb its strength.

Azumi further added that speculators were over-reacting after the yen rose to a three-month high versus the dollar and the euro.

Speculation is growing over whether Greece will have to leave the euro zone because its economy won’t survive the fiscal spending cuts needed to bring its public debt under control.

This resulted in the dollar tumbling over 1 percent against the yen on Thursday to hit a three-month low of 79.12 yen while the euro extended its decline into the European trading session on Friday to reach a fresh three-month low of 100.19 yen.

Last October 31, the Bank of Japan intervened in the currency markets when the dollar fell to a record low against yen. The unilateral intervention cost a record 8 trillion yen ($100.6 billion) to halt the surge in yen. A strong yen threatens Japan’s export-focused economy.

Forex News – Japan warns of possible intervention due to yen strength

Euro extended its  decline against the dollar and yen during the Asian trading session, prompted by the crisis in the euro zone. Concerns over whether  Greece may leave the euro zone have led to contagion fears especially since Spain’s banking system is now fragile. Adding to bearish sentiment, Moody’s ratings agency downgraded sixteen Spanish banks.

EURUSD fell to a fresh four-month low of 1.2654.

Meanwhile, EURJPY fell further in Asia to a three-month low of 100.44.

Sterling continues to underperform after Wednesday’s dovish Bank of England quarterly inflation report increased the likelihood of more QE. GBPUSD dropped to a two-month low of 1.5735.

Yen maintained strength in the Asian session , resulting in the Japanese Finance Minister Azumi to comment that the excessive FX moves are undesirable and he is ready to act if necessary  to curb yen strength. USDJPY plunged over 1 percent on Thursday following disappointing U.S. economic data, reaching a three-month low of 79.12 where it consolidated during the Asian session

The Australian dollar fell further against the greenback as weak Asian bourses and soft China housing data dragged on the commodity-linked aussie. AUDUSD slipped to 0.9813, the lowest level since November 2011.

Forex Asia Review – EURUSD slips to new four-month low

Facebook Inc.  announced on Thursday afternoon in the U.S. its initial public offering at $38 per share. This is the biggest internet/technology IPO in history with the company raising $16 billion.  The offering price puts Facebook’s total market capitalization at just above $100 billion.

The IPO comes in at the high end of the range that was previously expected. The social network giant had given a target between $34 – $38 per share.

Reports say that Facebook Inc., led by 28-year old co-founder and Chief Executive Mark Zuckerberg,  sold about 421.2 million shares in the debut; 180 million shares were sold by the company itself, with the remaining shares coming from selling shareholders. Underwriters have been granted over-allotment options of about 63.2 million shares.

The social network giant is estimated to currently have more than 900 million users, growing substantially in less than a decade from a Harvard University dorm-room project.

Facebook Inc. shares will begin trading Friday morning on the Nasdaq Stock Market, under the ticker symbol “FB.”

Market News – Facebook sets IPO at $38 per share

Euro went into the U.S. session with a $1.26 handle, after EURUSD hit a new four month- low of 1.2666. But a further decline was halted as the dollar lost some strength following weaker than expected U.S. data from the Philly Fed on U.S. Mid-Atlantic manufacturing. However, the single currency remains vulnerable amidst the turmoil in Europe, with markets focused on both Greece and Spain. There is increasing fear of contagion to Spain and Italy from the risk of Greece exiting the euro zone. Spanish bond yields surged today.

Sterling continues to weaken in reaction to uncertain Bank of England policy following a gloomy quarterly inflation report on Wednesday. If the BoE introduces more QE this would weaken the pound. GBPUSD fell to 1.5789, the lowest since March 22.

The yen posted sharp gains against the dollar and euro due to safe haven demand on concerns for banks in Spain and Greece . EURJPY dropped to 100.54, the lowest since February 6. USDJPY spiked down after the Philadelphia Fed data showed a more than forecast drop in its manufacturing index.  Dollar tumbled over 1 percent to 79.12, the lowest level since February 17.

The Canadian dollar weakened sharply against the U.S. dollar, down 0.6 percent, with USDCAD surging to a four-month high of 1.0190 in the North American trading session. The commodity-linked Canadian dollar has been weighed down by falling crude oil, which is a major Canadian export.

Forex News Review – USDJPY plunges to 3-month low

The Canadian dollar weakened against the US dollar during the early North American session on Thursday after some mixed US and Canadian economic data failed to lift sentiment and lacked the strength to offset underlying concerns surrounding the deepening turmoil in Europe and fears of contagion arising from the Greek crisis.

Data from the United States showed that U.S. jobless claims held steady at 370,000, slightly disappointing market expectations, which were forecast at 368,000.

Slightly higher than expected domestic wholesale trade figures on the back of strength in the motor vehicles and parts subsector did little to encourage investors.

Meanwhile data from Canada showed that foreign investors reduced their holdings of Canadian securities for the second time in three months in March, largely by selling off Canadian treasury bills.

USDCAD surged to a four-month high of 1.0176 by 10am New York time, the highest level since January 17.

Forex News – Canadian dollar weakens against USD to worst level since January

Euro bearishness resumes as markets are still focused on Greece and Spain. Accelerating the decline in the single currency today was a Spanish bond auction which resulted in higher yields due to concerns of the risk of contagion to such peripheral euro zone countries like Spain.  Spanish Prime Minister Mariano Rajoy warned on Wednesday that his government, struggling to reduce its budget deficit, could soon find it difficult to fund itself affordably on the bond market unless the pressure eases.

Meanwhile the ECB stopped providing liquidity operations to Greek banks due to their under capitalization. Greece goes back to the polls in mid-June after the failure of the May 6 elections to form a government, stoking fears of Greek exit from the euro

EURUSD fell to a four-month low of 1.2666, threatening the 2012 low of 1.2625.

EURJPY broke below key support of 102.00 and tumbled to a three-month low of 101.89

Sterling continues to be under pressure after yesterday’s dovish Bank of England quarterly inflation report increased the likelihood of more QE. GBPUSD dropped to a one-month low of 1.5825, down over 100 pips on the day.

USDJPY broke out of range and fell to 80.14 in late European trading as safe haven demand propped up the yen again.

USDCHF nudged higher to a new four-month high of 0.9480 in Europe on dollar strength due to safe haven flows to the global reserve currency. The greenback has gained over 4 percent against the Swiss franc so far this month.

USDCAD surged to 1.0156, the highest since January 23  as the commodity-linked Canadian dollar suffered amid risk aversion and fears of slowing global growth.

Forex Market Review – Euro falls back below $1.27, Spanish bond yields rise

The dollar eased after the FOMC April policy meeting minutes were released on Wednesday.

The report shows that several Federal Reserve policy makers were in favour of more stimulus measures to support the U.S. economy if the recovery slows down. This leaves the door open for more QE (quantitative easing) which is usually negative for the dollar.

While half of the FOMC committee members saw risks to the growth outlook as broadly balanced, nearly all the rest saw dark clouds on the horizon, both within the U.S. and globally.

“Participants identified several downside risks to the projected pace of economic expansion, including the fiscal and financial strains in the euro area and the possibility of an abrupt fiscal consolidation in the United States,” the minutes said.

Some Fed policy makers, including Fed Chairman Ben Bernanke, have expressed concern over the U.S. economy .

Several members of the FOMC  ”indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough,” according to the April meeting minutes.

Forex News – Fed policy meeting minutes leave door open to further QE