The Euro hit a new two-month low against the US Dollar, as mounting fears of Europe’s debt crisis, particularly the Greek problems, will spiral out of control. After Fitch’s Greek rating cut, Italy was given a blow too after its credit outlook was downgraded by Standard and Poor’s. Meanwhile, results of the Spanish regional elections on Sunday raised concerns after the ruling Socialist Party defeat, as investors are not confident that Spain will be able to maintain austerity measures to handle its debt burden. The start of the new trading week began with the Euro sell-off, extending losses from last Friday, to lose 165 pips in the earlier two sessions, before rebounding slightly in the US session. After session lows of 1.3985, EURUSD rose up to 1.4068 to make it back above the critical psychological 1.4000 level, buoyed by sovereign buying, particularly by Asian central banks. The focus will be on how long the Single currency will be able to remain above the key support level, considering investors are turning to the greenback in the belief that the US economy will outperform the struggling Eurozone.
Cable declined all day to break past last week’s May 18 five-week low to touch 1.6087 in the US session, affected by EURUSD losses. A broadly stronger US Dollar battered the Pound, which has been struggling recently amid a slumping British economy, evident in recent economic data, and unchanged number of votes after the Monetary Policy Committee voted, suggesting the Bank of England hawks are losing influence, shedding a dim light on a rate hike anytime soon.
USDCHF traded in a range throughout the US session, between highs of 0.8848 and lows of 0.8811. The Swiss Franc is considered a safe haven currency and strengthens in times of crisis, however, the stronger US Dollar today managed to struggle against the Swissy as investors equally demanded both less risky currencies.
The Canadian Dollar reached a low against a stronger greenback in New York trading, with the USDCAD pair peaking at 0.9809, the highest level since March. The Loonie is a commodity-linked currency, meaning as commodity prices (with the exception of gold) fell broadly today, especially oil, the Canadian currency was dragged down as well. Crude oil slid from the earlier two sessions, extending losses into the US session, touching lows of $96.36. Meanwhile the Bank holiday in Canada (Victoria Day) added to lighter trading in the Loonie.
Gold climbed to highs of $1,517.38 from opening the US session at $1,508.88, the highest level since May 11. Session lows were recorded at 1503.73. Despite other commodities falling on European debt concerns, investors remained confident in the precious metal even as the US Dollar strengthened. This doesn’t usually happen since the two usually have an inverse relationship. Even though investors are turning away from risk (in the Euro) and switching to the US Dollar, they are still buying gold as a hedge against any kind of sovereign defaults. Meanwhile, spot gold priced in Euros hit a record high of 1,080.04 Euros and ounce, following the inverse relationship rule.