European leaders scramble to solve debt crisis

pushed the markets to believe that the European Union is moving closer to a solution on how to contain the region’s debt crisis.
The positive news coming from the euro-zone has taken risk aversion off the table leaving dollar tumbling.
The dollar dropped against all of its major counterparts and commodities advanced, reducing demand for a refuge.
The dollar fell against the euro as it was trading at 1,3923 and weakened further against the yen as it declined to 76,12.
The 17-nation euro advanced versus the dollar as European politicians attempted to craft an effective response to the region’s sovereign debt crisis.
In Japan the yen strengthening against the dollar is a major concern for most Japanese exporting companies as they feel this could threaten their profits.
Bank of Japan is willing to step in to stem the currency’s strength by selling the yen and increase their foreign currency reserves to weaken their currency.
Volatility and uncertainty has left the demand outlook in a bad state. In London the pound weakened against most of its major trading currencies on concern UK economic growth is slowing.
The pound was little changed versus the euro amid doubts European leaders will contain a durable solution to the debt crisis, reducing demand for the pound.
UK Prime Minister David Cameron warned: “Turmoil in the euro area is weighing so much on the UK economy.”
Now when you look at the Eurozone situation that leaves the pound on a bearish mode relative to poor growth differentials.
The market still remains bearish on the pound leaving investors looking else for better yields and growth.
Pound was little changed at 87,14 pence per euro, after strengthening as much as 0,4 percent to 86,74. The sterling pound fell 0,1 percent to 121,52 yen and strengthened 0,2 percent versus the dollar to US$1,5978.
Sterling has dropped 1,2 percent in the past six months, according to market analysts from various European banks.
The crisis in Europe means that greater fiscal and economic integration in the euro zone is inevitable.
Australian and New Zealand dollars rose for a third day after a report showed China’s manufacturing may expand for the first time in four months.
Last week we saw moderate growth figures coming from China, as market analysts said the Chinese market grew by 9,1 percent.
Aussie and New Zealand dollars extended their gains versus the greenback as US stocks rallied along with commodities, encouraging demand for higher-yielding assets.
A long position in the Aussie against a short position in the New Zealand dollar given the better trade relations between the Australian and China.
Aussie dollar gained 0,7 percent to US$1,0452, after earlier losing as much as 0,6 percent. New Zealand’s dollar advanced 0,6 percent to US80,78 cents.
South African markets
The rand advanced to its strongest level in a week as commodity prices rallied amid signs the global economy is recovering and Europe’s leaders moved closer to a plan to contain the region’s debt crisis.
Rand appreciated 1,1 percent to 7,9532 per dollar in Johannesburg, after climbing to 7,9007 per dollar in earlier trade, against the euro, South Africa’s currency was trading to 11,0228.
Risk appetite is starting to show signs and really benefiting some of the emerging market currencies.
It’s important for our Zimbabwean forex dealers to exercise caution ahead of that EU summit and make rational bets to avoid money-losing trades.
Commodity markets
Gold advanced on concern that US monetary policy aimed at shoring up growth will spur inflation.
Federal Reserve Chairman Ben Bernanke said that a third round of large-scale securities purchases may become warranted to boost the economy.
Another driver for the bullion to rally was that of the renewed Chinese growth boosting demand for the metal.