The Euro traded in a range against the Dollar today hitting highs of 1.4281 before falling to 1.4174. The Euro rose ahead of the U.S. Senate vote on the U.S. debt deal but gains were capped as Italian and Spanish 10-year bond prices dropped and pushed yields up to 14 year highs versus the benchmark German bund, on concern that slowing growth will hamper efforts to deal with Euro zone debt. Meanwhile, spending cuts included in a U.S. debt-limit compromise agreement will also harm the global economy. Based on European growth and global concerns, the ECB may change its hawkish stance on monetary policy, which could keep Euro low.
Sterling traded sideways in the session against the Dollar, with a brief spike down to 1.6222 from the open of 1.6277 and closed up at 1.6305. The Pound has been trading lower than when it opened the European session, due to weak U.K. construction data as well as strong risk aversion in the markets, turned investors away from riskier currencies like the Pound.
The Yen gained against the Dollar in the U.S. session, as USDJPY fell to 76.94 from an early session high of 77.45. Fears about a possible downgrade of the United States’ coveted triple-A credit rating led investors to bet in favor of the perceived safe-haven Yen. However, Yen strength is threatening profits of exporters from large Japanese corporations , endangering the nation’s rebound from the devastating March earthquake.
The Canadian Dollar traded much weaker against the U.S. Dollar in the New York session compared to the European session, and fell to its weakest level since July 18 after U.S. data showed consumer spending fell in June. Weak U.S. data affects the loonie since the United States is Canada’s major trading partner, and consequently sluggish U.S. growth also affects growth in Canada, and would make it less likely for the Bank of Canada to raise rates until 2012. The Canadian Dollar was also weighed down by falling commodity prices, especially crude oil which Canada exports. USDCAD hit a high of 0.9586 from the New York open of 0.9567.
The Swiss franc jumped to new record highs against the dollar and euro beating the previous session records. USDCHF reached 0.7640 and EURCHF touched 1.0843. Investors were fleeing to safety due to mounting concerns about fiscal trouble and weak growth in the U.S and Euro Zone and fears about a possible downgrade of the United States’ coveted triple-A credit rating.
Gold surged to new all time highs after opening the New York session at $1,627.32, it jumped to $1,659.02. Fears increased amongst investors of a possible downgrade of the top-notch U.S. credit rating. Such a move would raise borrowing costs which would further weigh on the struggling U.S. economy. A string of weak U.S. data recently has raised concerns of another recession, prompting investors to invests in the safe haven precious metal.