In US trade, both the euro and the pound surged higher as risk appetite began to gain traction ahead of this week’s two key event risks.
Traders were happy to unwind short euro positions, pushing EUR/USD above the 200-day moving average of 1.2835 after Germany's Constitutional Court confirmed it would not delay its verdict on the validity the ESM which is scheduled for today’s European session. In anticipation of a positive ruling which would clear the way for the €500 billion bailout fund to get formal German approval, European equities were strongly bid as was the euro which pushed up to four-month highs in the 1.2850s.
Continuing optimism (or hope as some are suggesting) that the Fed will announce a fresh round of asset purchases this Friday at the FOMC meeting, along with comments from China’s Premier Wen Jiabao that China would meets its stated 7.5% growth target this year, underpinned the funds flow into equities, commodities and risk assets. In early Asian trade, both the euro and the pound are holding just above their respective US closing levels of 1.2855 and 1.6070.