Forex Market Review – Euro recovers on strong German growth data

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Euro recovered in the European trading session, bouncing off four-month lows against the dollar after being lifted by better than expected German GDP and euro zone GDP. Germany, which is the largest European economy, reported strong growth, with GDP at five times higher than forecast. Meanwhile, euro zone data showed the region avoided a recession. Adding to more bullish sentiment today was news that Greece promised to pay 430 million euros on bonds maturing today.

EURUSD bounced off 1.2813 and rose to a session high of 1.2868. But euro remains vulnerable to headlines news out of Greece, which has yet to form a government.

Cable reached a new three-week low below 1.6036 in London trading, driven by sterling weakness against the broadly rising euro today. EURGBP rose to a session high of 0.8013, up 0.6 percent on the day. UK trade balance data released today show a continuing trade deficit.

USDCHF was due for a correction after a strong rally yesterday to a four-month high of 0.9371. The pair eased to 0.9333 in the European session.

The broad recovery in the euro helped lift EURJPY to 102.86 from the Asian session low of 102.26.

USDJPY showed a slow grind to 79.95, clawing back some losses after yesterday’s sharp drop to 79.67. A more upbeat sentiment today has taken demand away from the safe haven yen.

The Australian dollar bounced off five-month lows to rise back above parity with the US dollar. AUDUSD hit a high of 1.0014, rising from the Asian session low of 0.9944 when the aussie was dragged down following the RBA policy meeting minutes which signalled further rate cuts to come.

On the economic calendar, in the upcoming US session we have US retail sales and core CPI data. Focus will be on the US dollar reaction to the data.