Euro remains vulnerable to equity market volatility, as European bourses fell today, dragging down FX market sentiment and pressuring the euro. European banking stocks fell sharply, particularly French bank, consequently increasing concerns of euro zone debt contagion and a spread of the crisis to the banking sector. Unexpectedly lower U.S. jobless claims data towards the end of the session accelerated euro’s fall as the dollar picked up. EURUSD dropped from an early session high of 1.4272 down to 1.4101.
GBPUSD opened Europe at 1.6179 after having a good run in the prior Asian session, but momentum weakened as Sterling ran into resistance at 1.6205 and dropped against dollar to a session low of 1.6115. Euro zone debt concerns and UK government fiscal austerity plans are likely to keep the Pound pressured. Yesterday the Bank of England quarterly inflation report said the outlook for growth in the British economy has weakened.
The Swiss franc weakened against the dollar and the euro after Swiss Central Bank Vice President Thomas Jordan said a temporary peg of the currency to the euro is within the range of options that policy makers could use to curb its appreciation. The central bank is also considering expanding monetary policy without intervening in foreign exchange markets, which led to speculation that the bank could be considering introducing some kind of negative interest rate. USDCHF rose to 0.7523 from the session open of 0.7313. Dollar rise was accelerated at the end of the session after positive U.S. jobless claims data. Even a weaker euro rose against the Swissie to 1.0643 from 1.0403.
USDJPY opened Europe at 76.59 edging down very close to the record low levels reached after the March earthquake. The moment the pair touched that level, the dollar shot up against yen to 77.01 within a minute. Markets were spooked thinking it was a BOJ intervention but the bank denied it. Possible large bank or sovereign buyer had a large order, but the spike was brief as USDJPY soon fell back down to the earlier lows prior to the spike, hovering at 76.42. Investors continued to buy the safe-haven currency even as speculation grows that Japanese authorities may step at any time to curb yen strength. Yen strength is also attributed to a record high Chinese yuan fix which strengthened other Asian currencies used as a proxy for the Chinese currency. However, thirty minutes left for the European session, overlapping with U.S. session open, USDJPY surged to 76.86 as optimistic jobless claims data from the U.S. boosted the dollar.