The U.S. Dollar extended gains against its major counterparts yesterday ahead of the EU summit that is taking place today and tomorrow, which few expected to result in fresh measures to deal with the debt crisis in the Eurozone.

The U.S. Dollar extended gains against its major counterparts yesterday ahead of the EU summit that is taking place today and tomorrow, which few expected to result in fresh measures to deal with the debt crisis in the Eurozone.

Hopes that European leaders would make headway on dealing with the debt crisis in the region faded after German Chancellor Angel Merkel reiterated her opposition to the idea of joint Eurozone bonds. She then went on to say that the proposal for “eurobonds” went against Germany’s constitution, which everyone in the room agreed with.

Italy saw borrowing costs climb to the highest level since December at an auction of six-month government bonds, as investor sentiment towards Italy continued to deteriorate. Italy’s Treasury sold the full targeted amount of €9 billion of six-month government bonds at an average yield of 2.95%, up from 2.10% at a similar auction last month.

In the US, durable goods orders rose by a seasonally adjusted 1.1% in May, beating expectations for a 0.4% increase, indicating that the manufacturing sector is stabilizing following a 0.2% drop in May, which resulted in Dollar strength against the Pound.

Yesterday, the Pound started the day strong however it came under pressure later on in the day as expectations for fresh easing by the Bank of England overshadowed an industry report showing that U.K. retail sales climbed to the highest level since December 2010 in June, boosted by the Jubilee celebrations.

Looking ahead today, investor’s eyes will be glued to news from the EU summit; with Merkel openly objecting to the “eurobond” proposal earlier yesterday we are expecting the likely outcome to be “unsure” and be put back to another date. In effect they are simply trying to gain more time. If however they agree to stick together we could see short-term containment in the Euro, so now maybe a good time to look at your EUR requirement.

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