EURUSD fell to its lowest level since January as investors worry about a Greek default happening sooner and leading to a European banking crisis. Franco-Belgian bank Dexia led European bank shares lower amid growing concern that banks are having trouble funding themselves due to their large exposure to Greek debt. The EcoFin meeting produced few concrete solutions, only that euro zone ministers agreed with Greece to postpone the next aid tranche until mid-November. Additionally they agreed to revise the July deal on PSI (“private sector involvement”) that entails investors contributing 50 billion euros to a 159 billion-euro bailout package. EURUSD fell to a nine-month low of 1.3145 early in the session before steadying off.
GBPUSD headed down from an early London high of 1.5456 to an 11-day low of 1.5360 as the pound was hurt by weak UK construction PMI data, giving a below forecast reading of 50.1 in September. The ten month-low reading fuels expectations for the Bank of England to launch further quantitative easing by their next policy meeting this week in order to boost the UK economy
EURJPY hovered around the ten-year low reached in the Asian session, opening Europe at 101.29 and fell early to 100.79 but remained supported above that. USDJPY opened Europe at 76.64 and broke out of this week’s top of the range by surging to 76.78.
The Australian dollar extended losses against the US dollar in the European session to fall around 130 pips from an early Europe high of 0.9539 to a 13-month low of 0.9412. The aussie was hurt by a risk off markets and also because of the Reserve Bank of Australia hinted on future rate cuts if an improved inflation outlook continued later in the year.
USDCAD rose to a 13-month high of 1.0574 from an early Europe low of 1.0510 to a 13-month high of 1.0577 as the commodity price-sensitive Canadian currency was battered by a risk averse market. Canada is a major oil exporter and crude prices dipped to US$74.95 in London trading recording a new 12-month low.