EURUSD erased all gains made earlier as the single currency was hurt after Moody’s ratings agency downgraded the debt ratings of eight Greek banks. In the prior session euro had strengthened on news that G20 nations pledged to address the EUR debt crisis and support the global financial system. However the euphoria faded fast and the focus has turned back to the euro-zone debt problems right now as Greek default looms. EURUSD fell to a European session low of 1.3417 from an early high of 1.3558.
GBPUSD extended gains early into the European session as sterling was lifted by the positive G-20 statement. Also a report issued today from the British Bankers’ Association showed U.K. mortgage approvals rose to their highest level in 15 months in August. Sterling soon lost steam and pared all gains against the dollar to head back down to 1.5382 from the session high of 1.5468. The pound remains under pressure by increasing speculation that the Bank of England may implement more quantitative easing to stimulate the sluggish UK economy.
USDCHF corrected lower into Europe, heading to as low as 0.8995 mid-session but soon rebounded to 0.907 as the overall negative market sentiment pushed investors to the liquid dollar. The franc has been weakening since the US Fed statement and was further hurt on Thursday after a survey showed investors are pessimistic about the prospects of the Swiss economy. Against the broadly weaker euro though, the franc gained strength to bring EURCHF down to 1.2184. But further downside will be limited as fears that the Swiss National Bank could raise the cap on the Swiss franc from 1.20 francs per euro to 1.25.
The Australian dollar fell to a 9-1/2 month low against the U.S. dollar as falling European and US stock markets and declining commodities affected commodity-linked currencies like the aussie. AUDUSD 0.9667, its lowest since early December 2010. Investors are sceptical about Europe’s banking and debt crisis, and are increasingly concerned of an economic recession.
EURJPY consolidated early in the London session after having being lifted on news in the prior session that the G20 was committed to addressing the risks of the euro zone debt crisis. EURJPY fell to 102.31, just a few pips shy of the ten year low reached on Thursday on renewed risk aversion and concerns about the euro zone debt crisis after Greek banks were downgraded today by Moody’s . USDJPY saw light trading volumes as there was a market holiday in Japan today with the nation celebrating Autumn Equinox Day. USDJPY traded on the downside to 76.14 from 76.28 as a pledge by Group of 20 nations to tackle rising risks failed to ease concern the global economy is on the brink of another recession.