EURUSD remained steady today in light trading as investors wait eagerly and nervously for the EU Summit to begin tonight in Brussels at 6pm local time. The second EU Summit today will hopefully iron out sticky issues such as measures to expand the EFSF, haircuts on Greek bonds and bank recapitalization. There is concern that the leaders today will not deliver any concrete solutions and this could be devastating for the euro. Throughout the European treading session, the single currency remained supported above 1.3895, helped by a broadly weaker US dollar. EURGBP gained 50 pips to hit a high of 0.8720.
GBPUSD to a fresh six-week high at 1.6040 just before the open of the London session, benefitting from a weaker US dollar and large firms bought up the pound in anticipation of the EU Summit. As the European session got underway, cable failed to break past resistance levels and dropped to 1.5969 as profit-taking ensued and sentiment turned a little weak as the EU meeting gets closer and investors prefer not to take on any more long positions.
USDCHF was sold off early in the European session to drop to 0.8728 from the open price of 0.8779. A broadly weaker US dollar and damp risk appetite due to an uncertain EU Summit helped strengthen the Swiss franc. The dollar was weighed down after Fed officials yesterday signaled that more quantitative easing is possible and will be expanded should it be required. EURCHF fell from 1.2216 to 1.2156.
USDJPY hit a new record low again today, falling to 75.70 at 10:03GMT, breaking past yesterday’s low of 75.73. Investors selling off the US dollar on speculation that the Federal Reserve will opt for more monetary easing. Also demand for the safe haven yen is up ahead of the EU Summit today. Japanese officials are concerned about yen strength and BOJ Governor Azumi has given repeated warnings of an intervention in the currency markets if necessary. Tomorrow Bank of Japan officials meet to discuss more monetary easing and measures to mitigate the impact of the strong yen on Japan’s economy.
AUDUSD declined for a second day as the Australian dollar was hurt by disappointing consumer inflation data which fuelled speculation that the Reserve Bank of Australia could cut interest rates as soon as at next week’s policy meeting. AUDUSD fell to a low of 1.0335 from an early European session high of 1.0395.
USDCAD consolidated into a 1.0111-1.0156 range after the Canadian dollar weakened by over 2 percent against its U.S. counterpart yesterday following news that the Bank of Canada left interest rates unchanged and gave a dim outlook on growth. The focus will be on the BOC monetary policy report which will provide more insight into the bank’s view of economic conditions and inflation that will hint on what interest rate decisions might be before the next rate fix.