EURUSD pared all gains made in the prior session when it was lifted on optimism that Greece will receive its next aid tranche following a satisfactory conference call with its international lenders. EURUSD opened Europe at 1.3698 and headed down to a session low of 1.3628 as risk aversion picked up and investors wanted to play it safe ahead of the US Federal Reserve meeting later today.
Sterling weakened across the board following the dovish Bank of England minutes, touching an eight-month low against the dollar and a 2-1/2 year low against the yen. MPC meeting minutes showed that the BoE is ready to pump more money into the UK economy and could expand QE (quantitative easing) as early as next month, which would result in weakening the British pound. GBPUSD touched 1.5609 immediately after the news, and continued to decline to 1.5603 by the end of the session.
The Swiss franc was weaker than yesterday on the possibility that the Swiss National Bank will raise the currency ceiling to 1.25 franc against the euro from the current 1.20 level. USDCHF remains steady in a range after the sharp spike in Asian session to 0.8983, the pair eased to hover above 0.8920 but failed to break past 0.8957 ahead of the Fed meeting later today as speculation rises that further stimulation will be announced.
USDJPY remained weak in the European session after easing down from a spike to 76.64 in the Asian session. After rumours of a BOJ intervention were dismissed, yen regained strength versus a broadly weaker dollar as investors were reluctant to go long the dollar ahead of the crucial US Federal Reserve policy meeting later today. If the Fed signals more monetary stimulus to boost the ailing US economy, this could give rise to re introducing QE3, and more quantitative easing results in a weaker dollar as it means flooding the system with dollars. USDJPY touched a session low of 76.23 before steadying off around 76.30. Yen surged to its strongest levels since January 2009 against sterling following BoE minutes that show a possibility of QE later this year. GBPJPY tumbled to 119.10.