Euro was sold off in the immediate European session open as traders in Europe reacted to the overnight news that Standard and Poor’s may cut the credit ratings of AAA rated euro zone countries as well as other members of the euro region. EURUSD fell to 1.3334 but rebounded after better than expected German factory orders data. Orders for October posted their strongest increase since March 201, rising 5.2 percent in October from a previous month decline of 4.6 percent. This helped EURUSD hit a session high of 1.3427before easing on profit taking. The focus remains on the European Central Bank policy meeting on Thursday with speculation of a rate cut and the EU Summit on Friday.
Sterling fell to a session low after data showing UK house prices fell by 0.9 percent in November. GBPUSD touched a session low of 1.5590. After a brief rebound to 1.5663, the pound was weakened and brought back down to 1.5606 following the announcement by the BoE of the launch of a new sterling liquidity facility.
The Swiss franc fell sharply against both the dollar and the euro after data showed Swiss consumer prices fell in November. This will fuel speculation that the Swiss National Bank may raise the current 1.20 franc peg against the euro. EURCHF surged to a session high of 1.2417 from 1.2356 before the news. USDCHF rose to 0.9295 from 0.9228.
The yen rose versus most of its major counterparts early in European trading due to the Standard and Poor’s downgrade warning to the euro zone countries, spurring demand for the relative safe haven yen. EURJPY fell to a low of 103.62 but bounced to 104.32 after euro rose across the board on the German economic data. USDJPY was mostly rangebound between 77.62-78.