Forex Europe Review – Sterling boosted after GDP data, Swiss Franc breaks records again

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Forex News: Sterling drops to a 2 and a half month lowEURUSD pulled back from the Asian high of 1.4521 to ease back to 1.4461 as a correction was due after an aggressive rally boosted it by 167 pips following U.S. President Obama’s speech. The Euro is expected to remain supported as long as the Dollar is under pressure due to stalled talks in Congress over reaching a deal to raise the debt ceiling. U.S. President Barack Obama warned of dire economic consequences if a deadlock in talks on raising the debt ceiling were to lead to a default on bond obligations.

 

Sterling surged to a six-week high against a broadly weaker dollar following the release of GDP data in the U.K. which indicated the economy grew by 0.2 percent as expected in the second quarter. Despite being lower than the previous quarter, markets were relieved that numbers weren’t worse, and also optimistic comments from the National Statistics Office signalled that if it weren’t for extraordinary factors such as the Royal Wedding and Japan earthquake, the numbers would have been as high as 0.7 percent. GDPUSD propelled to 1.6420 from an early low of 1.6321.

 

 

The Swiss franc strengthened to new record levels against the Dollar as risk aversion pushed investors to the safe haven currency. As ongoing political wrangling about raising the U.S. debt ceiling fuelled fears about the possibility of a debt default, which could trigger more losses in the U.S. currency, this made kept investors jittery and caused a Dollar sell-off. USDCHF touched a new all-time low as a result, at 0.7997.

 

 

The Japanese Yen remained strong against the Dollar, breaking four-month highs in the prior Asian session as investors dropped the Dollar on concerns of a U.S. government debt downgrade. USDJPY settled near the 77.88 low and consolidated in the European session. The accelerating Yen is making Japanese officials nervous since it will be detrimental to the fragile export-reliant Japanese economy. Finance Minister Yoshihiko Noda repeated again today his mantra about closely watching “one-sided” moves hinting an intervention is possible if necessary.