Forex Market Review – Pre-US open: Euro struggles after Moody’s downgrades Italy

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The European session has been somewhat subdued ahead of the weekend. Euro remains around a two-year low after a Moody’s downgrade of Italian bond ratings kept bearish sentiment alive. China GDP data earlier in the day was nothing extraordinary and not enough to boost risk appetite, although second quarter growth numbers met expectations. A bond auction of Italian government bonds only gave a brief spike in the euro. Italy sold 5.25 billion euros of debt, matching their maximum target. However, bond yields remain high.

 

EURUSD jumped up 18 points 1.2217 on news of the Italy bond sale before returning to initial levels. The session low was 1.2181.

 

Sterling was buoyed after the Bank of England released the details of its lending plan, which will boost credit by 80 billion pounds to companies and households, with the aim of stimulating the sluggish UK economy. GBPUSD began rallying towards a high of 1.5478 going into the U.S. session, up from a low of 1.5412.

 

USDJPY is effectively unchanged and has been stuck in a range since yesterday, trading between 79.16 and 79.38. Yen is holding onto gains made after the Bank of Japan refrained from further policy easing after its monthly meeting yesterday. EURJPY did nothing, trading a tight  range of 96.54- 96.81.

 

USDCHF is trading close to a 1-1/2 year high hit yesterday at 0.9868, consolidating gains, with strong support above 0.9827

 

Looking ahead in the U.S. session we have PPI data and the University of Michigan consumer confidence report.