EURUSD bounced from a near nine-month low after speeches from ECB President Trichet and from Fed chairman Ben Bernanke. The euro had been falling for two days and was due for a correction given the opportunity after Trichet did not signal a rate cut for Thursday’s ECB meeting in his comments before the European Parliament today, dismissing speculation of a 25 basis point cut. Meanwhile, EURUSD surged to as US session high of 1.3314 after Bernanke saying the Fed is prepared to act further to help the economy also benefited the euro indirectly and weakened the dollar because further stimulus to the U.S. economy could mean that the Fed may relaunch quantitative easing and flood the market with dollars, depreciating its value
GBPUSD fell close to a thirteen-month low as sterling was under pressure after weak UK construction data added weight to speculation the Bank of England may resort to more easing. The pound was also under pressure along with other riskier assets and higher-yielding currencies as growing funding problems weighed down on the banking sector with some European banks under intense selling pressure due to their exposure to Greece. Cable fell to 1.5336 but rebounded to 1.5418 after Bernanke signaled the Fed may ease policy further to support the economy. This put downward pressure on the dollar.
The Canadian dollar weakened against its U.S. counterpart to touch a one year low as USDCAD soared to a high of 1.0656 late in New York trading. Risk aversion pushed investors to take refuge in the liquidity of the U.S. dollar as concerns grow over a Greek debt default, sparking worries that a European banking crisis could ensue.
USDJPY opened the US session at 76.67 and rose to a high of 76.97 to make up for all losses made in the previous European session. Also EURJPY climbed in the session to 102.33 from 101.06 as traders covered short positions and after US Fed Chairman Ben Bernanke signaled the U.S. central bank may continue stimulus and ease policy further to support the economy.
USDCHF hit its highest level in six months in the New York session after Ben Bernanke’s comments on further support for the US economy pushing the pair to as high as 0.9261. Meanwhile the EURCHF surged to 1.2281 from 1.2150, the highest level in almost two weeks. The reason for the Swiss franc falling against the euro was rising speculation that the Swiss National Bank may change the current cap of 1.20 CHF against the euro to move it to 1.30 in order to further weaken the Swiss currency.