Forex Europe Review – Euro plummets on worsening debt situation in Italy

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The Euro continued to slide against the Dollar in the European session, dragged down by increasing concerns over contagion of the Euro zone debt. Meanwhile, an emergency meeting of European officials is underway today, during which Italy is at the top of the agenda as confidence in Italian banks deteriorates after a large sell off on Friday of Italian assets and widening Italian 10-year bond spreads. The EU bailout mechanism (EFSF) has insufficient funds to support Italy should it be in danger of a default. EURUSD fell to a one-month low, losing177 pips since the European session opening price of 1.4202, falling to a low of 1.4024 .

Sterling was on the back foot of the Euro, taking direction from it due to lack of domestic fundamentals. As the Euro declined against the Dollar, the Pound followed, with GBPUSD falling from 1.6005 to 1.5935, as investors shifted away from risk currencies to the safer and more liquid world reserve currency, the US Dollar. Meanwhile, Sterling’s fall against the Euro was limited since between the two currencies the Pound was preferred as an alternative European currency. EURGBP fell to 0.8794 from 0.8872.

 

The Swiss Franc has been strengthening across the board as demand of its safe haven status increases during heightened concerns over the Euro zone debt crisis and general risk aversion. As Italy’s debt situation worsens, investors take caution in case of contagion, if debt spreads to the rest of the peripherals. The Euro fell to a record low against the Franc, reaching 1.1692 from the session open of 1.1906. USDCHF fell to 0.8329 from the open of 0.8354.

 

The Japanese Yen gained against most majors in the European session. The Euro fell to its lowest level in four months against the, dropping to 112.70 from 114.69. USDJPY fell in the session after a brief pullback from its huge drop on Friday, when the Dollar suffered losses after disappointing US non-farm payroll data. USDJPY fell to 80.31 from 80.74. Meanwhile, positive economic data from Japan today helped boost the Yen as well.

 

EURUSD

GBPUSD

EURGBP

USDCHF

USDJPY

OPEN

(07:00 GMT)

1.4202

1.6005

0.8872

0.8382

80.74

DAY’S HIGH

1.4203

1.6005

0.8890

0.8386

80.82

DAY’S LOW

1.4024

1.5935

0.8794

0.8329

80.31

CLOSE

(14:00 GMT)

1.4057

1.5954

0.8809

0.8348

80.39