Forex News Review – Euro extends losses below $1.27 on euro zone debt concerns

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Euro tumbled below $1.27 in the U.S. session as risk appetite faded ahead of the EU Summit on Wednesday.  EURUSD is down over 1 percent today, touching a low of 1.2657 in the New York trading session as investors are growing weary of the euro zone debt crisis and doubt whether the EU meeting would yield much progress in tackling the region’s debt crisis.  There were reports from Reuters quoting f ormer G reek Prime Minister Lucas Papademos as saying that preparations for Greece’s exit from the euro zone are being considered and the risk is real.

The focus will be on whether France and Germany can attempt to settle their differences over austerity measures. Meanwhile adding to damp sentiment, the OECD decreased its growth forecast and warns of the potential spillover effects of Europe.

 

Sterling is down 0.5 percent against the dollar today as market participants reacted to CPI numbers and public borrowing figures in the UK. Inflation came in softer than expected which gives the Bank of England more room to manoeuvre with regards to policy easing.  GBPUSD fell to 1.5740 in the U.S. session. However, the pound rose against the broadly weaker euro, with EURGBP tumbling to 0.8040 from an earlier day high of 0.8100.

 

Yen is down against the dollar following Japan’s sovereign credit downgrade from Fitch, with a rating drop of one notch to A+, as the agency maintains a negative outlook. USDJPY surged to as high as 80.13 in the US session, as the dollar was also given an extra boost following better than expected U.S. existing home sales. Dollar gave up some gains late into the session.

 

EURJPY tumbled in late North American trading, falling to 101.11 after rallying to 102.11. Focus  will be on the results of the Bank of Japan policy meeting on Wednesday.

 

USDCAD climbed to 1.0233 from an earlier low of 1.0150 as risk aversion hurt the commodity-linked loonie. Falling crude oil, a major Canadian export, also weighed on the CAD.

 

AUDUSD fell to 0.9786, the lowest level since November 23 last year.