Forex Review – Volatile Euro lifted after ECB Trichet’s hawkish comments

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The Euro was a little choppy today ahead of the Greek parliamentary vote on austerity measures tonight. EURUSD initially made up for losses from the Asian session, climbing back to a high of 1.4326 and soon lost momentum to drop to 1.4236 as markets are cautious not to go too far during these uncertain times. Towards the end of the European session, ECB President Trichet gave a press conference at a central bankers meeting in Amsterdam today, and in his speech mentioned to key words “strong vigilance” which are code words for interest rate hike. This gave a boost to the Euro as investors are optimistic that the ECB will raise interest rates by at least 0.25 percent next week. EURUSD rose back up to 1.4321.

 

Sterling weakened against most major counterparts as several weak economic data were released today indicating GDP fell as well as Britain’s current account balance worsened. The poor data will likely push the Bank of England to maintain interest rates unchanged, as hinted by BoE policy maker, Adam Posen when he mentioned today that the U.K. economy is at “little risk of inflation.” Cable reached a five month low at 1.5910 while the Pound touched a three week low against the Euro, with EURGBP hitting a high of 0.8965.

 

The Swiss Franc gained on positive economic data following the release of the UBC Consumption Indicator this morning. The index rose to the highest level since August 2010, producing a reading of 1.91 in May, compared to a revised 1.57 in April. Evidence that the Swiss economy is performing well, versus uncertainty in the Eurozone, gives more reason for investors to turn to buying the Swiss currency. USDCHF dropped to 0.8319 from a high of 0.8355 and EURCHF dropped to 1.1862 from 1.1957, slightly rebounding before the end of the session as Euro was lifted by Trichet’s hawkish comments hinting an interest hike may be likely next week.

 

The Yen traded in a range against the US Dollar, after being lifted in the Asian session following better than expected Japanese Retail Sales data. However, the Euro/Yen cross fluctuated quite a bit during European trading, mainly due to markets being nervous ahead of the Greek austerity vote tonight. EURJPY was pretty much forming a wide range, rising and falling between 115.77 and 115.12, closing the session up after Trichet’s positive comments boosted the Euro this afternoon.

 

EURUSD GBPUSD USDCHF EURCHF USDJPY
OPEN

(07:00 GMT)

1.4268 1.5945 0.8352 1.1919 80.77
DAY’S HIGH 1.4326 1.6002 0.8355 1.1957 80.91
DAY’S LOW 1.4236 1.5910 0.8319 1.1862 80.72
CLOSE

(14:00 GMT)

1.4316 1.5991 0.8321 1.1914 80.77

Note: Daylight Saving Time in effect for GMT