The euro climbed against the dollar to gain almost 100 pips in the European session, despite poor economic data highlighting sluggish growth in the euro zone. EURUSD rose to a high of 1.4475 from a low of 1.4380. The markets seem to be unscathed by June industrial orders which fell more than expected in the euro area and also the Ifo German business climate index showed morale dropped to its lowest in 14 months in August. However as the summit in Jackson Hole gets closer, when Fed Chairman Ben Bernanke is expected to signal more measures to boost the U.S. economy, resulting in flooding the system with dollars and weakening the greenback, the market is in no mood to short EURUSD right now.
Sterling initially gained against the dollar taking direction from the euro. Cable opened at 1.6489 to rise to 1.6532 but soon took a downtrend for the rest of the session as investors position themselves for possible weak U.K. economic data tomorrow and Friday on sales and on GDP. Meanwhile, better than expected U.S. durable goods data boosted the dollar, and brought GBPUSD down to a low of 1.6446.
The Swiss franc gained against the dollar and the euro most of the session as markets are uncertain ahead of the U.S. Fed Chairman Ben Bernanke’s speech on Friday. If he does hint there will be further monetary easing by the Fed, this will put pressure on the dollar and broadly weaken it. Investors prefer to protect their assets until then, turning to the safe haven Swissie. USDCHF opened the session at 0.7927 and fell to a low of 0.7884 before a rebound after better than expected U.S. durable goods data at the end of the session, bringing the pair up to 0.7910. EURCHF moved little, opening at 1.1414 to drop to 1.1400 but rebounding to 1.1443 after the U.S data.
The yen gained against the dollar as investors were disappointed after Japan Finance Minister Yoshihido Noda announced today a $100 billion credit line to help Japanese companies deal with the impact of a strong yen. Markets believe these measures are ineffective to support dollar/ yen and were expecting more stringent measures like intervening in the FX markets, so investors preferred to continue buying yen also in view that it is a safe haven asset and concerns of a slowing global economy are very strong. USDJPY opened Europe at 76.62 and fell to a low of 76.46. Meanwhile, investors are eagerly anticipating Ben Bernanke’s speech on Friday to signal more stimulus measures to boost the U.S. economy, which could result in dollar weakness, so investors are unwilling to go long USDJPY at the moment. Towards the end of the session, USDJPY spiked to 76.57 briefly after better than expected U.S. durable goods data.