The Euro extended losses against the US Dollar in the European trading session, breaking pas the critical psychological 1.4000 barrier, to touch new two-month lows of 1.3968. Expectations of a rate hike by the ECB could no longer buoy the Single currency. EURUSD opened down from the previous session at 1.4067 and slid 100 pips before briefly retracing. The is growing speculation that the possibility of Greek debt restructuring is unavoidable, especially after Fitch downgraded Greece by two notches last Friday to bring it two notches below investment grade. Meanwhile, Italy was also downgraded by Standard and Poor’s fueling concerns of contagion of the debt crisis to the peripherals. Additionally, protests in Spain and the results of the Spanish regional elections over the weekend, which resulted in the ruling Socialist Party losing against the conservatives out further pressure on the Single Currency. Early this morning, disappointing economic data for Germany and the Euro zone were released, indicating that manufacturing in the strongest economy in Europe, as well as the overall EU PMI has slowed down much lower than expected for the month of May.
Investors are reallocating assets to the U.S. expecting the economy to expand quicker than in Europe, thereby boosting the USD against most major currencies. This led to Cable falling almost 100 pips to a low of 1.6105 from a morning high of 1.6203. However, against the Euro, the Pound rose to a two-month high, buoyed by hawkish comments by Bank of England Chief Economist Spencer Dale, who hinted that policy makers should increase interest rates even if the UK recovery is uncertain. EURGBP fell to a low of 0.8663 from open price of 0.8686. The pair briefly retraced before closing the European session to rebound 40 pips up to 0.8703
The Swiss Franc recorded a new high against the Euro, which was weakened due to the ongoing debt crisis. EURCHF reached the lowest level since December 31, to reach 1.2322. The Swiss currency is known to be a safe haven investment so investors demand for CHF went versus the Euro, which they were selling off. Meanwhile the Swiss Franc rallied against the US Dollar today, and by the later European session, made losses against the strengthening greenback, as the USCHF pair rose 45 pips from 0.8799 to peak at 0.8843.
The Japanese Yen made significant gains against the weaker Single currency in European trading, with the EURJPY pair dropping almost 150 pips from the open level and session high of 115.32 down to 113.85. The pair rebounded before closing 114.94.Menawhile, the Yen also made gains against the US Dollar early in the session but soon outbid by a stronger greenback. USD JPY hit high if 81.98 and lows of 81.31 to close at 81.79.