Forex Market Review – Euro falls to 2-year low as EZ crisis weighs on sentiment

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Market sentiment was damp in the U.S. trading session as the euro zone crisis was the focus of the day. The euro weakened versus the dollar  after the Eurogroup meeting of finance ministers made little progress and added  to uncertainty about the euro zone ESM rescue fund.  Comments from Italy’s prime minister Mario Monti further weighed on the euro after he said that Italy may require aid from the rescue fund.

 

Meanwhile, investors are jittery as they wait for the German Federal constitutional court verdict on a hearing on complaints about the ratification of the ESM euro zone rescue fund and implementation of tough new budget rules.   A verdict, however, could take a few weeks, and the ESM was supposed to begin operation on July 1st.

 

EURUSD fell to a new two-year low of 1.2234 in the U.S. session, down 0.7 percent from the day high. The euro is likely to remain under pressure as overall sentiment is bearish.

 

Against the yen, euro fell to a five-week low of 97.20 yen, down 4 percent so far this month.

 

Euro fell to a 3-1/2 year low against the British pound 0.7892, the lowest level since November 2008. EURGBP is down 0.5 percent on the day.

 

GBPUSD touched a low of 1.5477 in New York trading, hurt by a negative outlook on the UK economy by BOE Governor King.  Earlier in the Europe session cable hit a high of 1.5548 following better than expected industrial production data.

 

USDJPY recovered from a low of 79.20 reached earlier in European trading, to climb up to79.48 in New York. The pair remains lower compared to yesterday, as risk aversion continues to push investors to the safe haven Japanese currency.