Euro hovered around a two-year low against the dollar as investors were concerned about Europe’s decision-making process after Germany’s Federal constitutional court did not make a ruling yet on the ESM (euro zone rescue fund) and the fiscal pact. This matter is very important since German courts must sign the ESM in order to activate it.
EURUSD consolidated losses during the Asian session after plunging to 1.2234 in the U.S. session. Euro is expected to remain under pressure as investor scepticism over Europe’s political hurdles will keep them cautious.
Sterling was little changed against the dollar as focus remains on the euro zone crisis. GBPUSD traded a range of 1.5511 and 1.5529 during the Asian session. The British pound traded close to a 3-1/2-year high against the euro. EURGBP tumbled to 0.7891 on Tuesday, the lowest since November 2008.
EURJPY led the risk-off move in the Asian session and extended losses to a five-week low of 97.08. USDJPY tracked the EURJPY and fell to 79.23 as safe haven flows propped up the Japanese yen. However, excessive de lines will be limited as there was another warning from the Japanese government that it stands ready to act against excessive volatility if needed. This, along with the Bank of Japan policy meeting on Thursday, means the 79.00 level will probably hold in the short-term.
Looking ahead, we have the U.S. Federal Reserve FOMC minutes to be released tonight. This may keep dollar subdued until the release.