Euro has retraced almost all of yesterday’s gains against the dollar as risk aversion has resumed after Spanish Treasury minister Cristobal Montoro commented today on the funding problems facing Spain, making investors nervous that the country may need an international bailout. The G7 talks had boosted the euro earlier but few market participants believe that concrete measures to tackle the debt crisis will be taken soon. The focus turns to European Central Bank policy meeting tomorrow. A rate cut would be negative for the euro. EURUSD fell 0.6 percent on the day to a European session low of 1.2409
Sterling fell during European trading hours reacting to broader market sentiment in the absence of domestic data. The UK markets are closed again today for the Queen’s Diamond Jubilee celebrations. GBPUSD began the session at 1.5320 and fell to 1.5392. Euro gave up gains against the pound, with EURGBP falling to 0.8088 from 0.8132.
Yen gained some strength against the dollar and euro as a result of heightened risk aversion. Movements were small though as the BOJ recently threatened intervention to curb yen strength. USDJPY is down 0.2 percent to 78.09 while EURJPY fell to 97.02 from 98.21.
Aussie gave up earlier gains against the greenback, following the overall risk-off market sentiment. Meanwhile, earlier in the day the RBA cut rates by 25 basis points. AUDUSD fell to a European session low of 0.9709 from 0.9791.