Forex Europe Review – Swiss Franc off record highs after unexpected SNB rate cut

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The Euro rose to a session high against the dollar after Euro zone retail sales data came in above market forecasts as well as final Services PMI data. European retail sales rebounded in June from a drop in the previous month, by 0.9 percent, led by E.U. powerhouse Germany. Expectations were for a rise of 0.5 percent, versus May’s drop of 1.3 percent in sales. EURUSD jumped to 1.4342 from a low of 1.4141. Euro was given a much needed boost after falling drastically on Monday due to rising yields in Italian and Spanish bonds, raising fears of debt contagion in the Euro zone.

 

Sterling rose against the dollar after better than expected Services PMI. The data indicated that activity in the dominant U.K. service sector grew at its fastest pace in four months, boosting optimism after Tuesday’s weak construction data. GBPUSD erased all losses made so far this week to rise to 1.6406 from the open of 1.6276. Gains are expected to be limited as the general growth outlook for the British economy is still lacklustre.

 

 

The Swiss franc moved off record highs against the U.S. dollar and the Euro after Switzerland’s central bank cut interest rates to halt the currency’s further rise. The Swiss currency has appreciated at an accelerated pace recently as concerns over global growth and debt issues in the E.U. and U.S. boosted its safe haven demand. USDCHF reached a new record low at 0.7608 in Asia today and after the SNB rate cut, the dollar rose to 0.7786 francs. The Euro also gained against the franc, after hitting a record low of 1.0792, EURCHF rose to 1.1146 in the European session. After a brief retracement, both pairs rebounded after the U.S. ADP jobs data that came in better than excepted.

 

 

USDJPY hasn’t moved much out of the range it was trading in since the Asian session as investors are afraid of buying up Yen for fear that if its rise accelerates again, the Bank of Japan will intervene in the FX markets to curb any further appreciation. BOJ governor Shirakawa has repeatedly mentioned every day in the past two weeks that he is keeping an eye on the markets and will intervene if necessary. A strong Yen is harmful for the export-reliant economy. Fortunately, Dollar’s fall has eased off after a debt deal was finally reached between U.S. lawmakers on Tuesday, averting a default by the country. USDJPY traded the session between 76.96 and 77.35. Better than expected U.S. ADP employment data also helped support the Dollar.