Posted on July 12, 2012 by Trading Point Investment Research Desk at 12:21 pm GMT
Euro tumbled to dip below $1.22 for the first time in two years as major risk aversion dominated the markets today. The ECB daily liquidity report showed that bank deposits have fallen sharply to 324.9 billion euros, presumably due to the latest ECB cut in the overnight deposit rate to zero. Lack of liquidity in the financial system is cause for concern amid a deep euro zone debt crisis.
The selloff in the single currency was also driven by general concerns over slowing global growth and a flight to the safe haven dollar. The FOMC minutes from yesterday hinted on no further easing in the near term, which helped give extra support to the greenback.
EURUSD opened in Europe at 1.2234 and drifted lower to break key support at 1.2200, approaching 1.2169 going into the New York session. This was the lowest level since 27 June 2010.
GBPUSD: after a brief correction in the Asian session to 1.5515, cable resumed its downtrend to 1.5432, the lowest level in a month.
USDCHF soared to a new 1-1/2 year high of 0.9866, the highest level since December 2010, due to a broadly stronger dollar boosted by safe haven demand.
Yen was the biggest gainer due to its safe haven status. The Japanese currency was also lifted due to the Bank of Japan not easing policy further. In its monthly policy announcement today the central bank said it tweaked its asset buying programme instead. The key overnight call rate was left unchanged between zero and 0.10 percent. USDJPY opened in Europe at 79.48 and declined to 79.22. EURJPY opened at 97.22 and dropped to 96.50, heading towards a seven-week low.
Looking ahead, in the U.S. session we have U.S. unemployment claims data. The forecast is for a slight increase in claims.
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