Euro up on short covering with markets awaiting ECB

The euro went up on Wednesday, although concerns about Spain’s precarious financial situation and the potential of the European Central Bank cutting rates could limit its increase.

The single currency recouped Tuesday’s losses after a Spanish minister’s claims the nation was seeing access to credit markets disappear helped in part, while unexpectedly strong growth data from Australia lifter the Aussie dollar as well as other riskier assets.

Meanwhile, G7 finance ministers carried out no immediate action to calm fears over the debt problems in the eurozone but did mention policy responses, such as making progress towards “fiscal and financial union in Europe’, according to the US Treasury.

Analysts claimed that closer financial integration would bolster the single currency, but progress is expected to be extremely slow, leaving a large number of traders looking to offload the euro on rallies..

Elsewhere, the US dollar remained pressurised after last week’s disappointing jobs data from the US triggered speculation that the Federal Reserve may launch a fresh wave of quantitative easing. RBS currency strategist Paul Robson said that the EUR/USD is expected to edge higher but pointed out that traders will sell rallies, explaining that a one cent rally would be an opportunity to fade it.