EURUSD pulled back from the Asian high three week high at 1.4534 to ease back to 1.4438 as a correction was due. Meanwhile, Spanish and Italian bond prices dropped today and yields increased relative to benchmark German bunds, on speculation Europe’s aid package may not be sufficient to prevent contagion and the region’s debt crisis will limit economic growth and earnings. A further decline in the Euro was stopped after disappointing U.S. durable goods data weakened the Dollar.
Sterling dipped slightly on Wednesday after disappointing UK factory orders data. The Pound fell off a six-week high of 1.6437 hit overnight, down to 1.6354 following data from the Confederation of British Industry showing factory orders index fell to -10 this month from +1 in June, well below the forecasted -2. Despite the weak data, Sterling is expected to remain supported due to the weaker Dollar.
The Swiss Franc hit a new record high against the Dollar as the European session opened, with USDCHF touching 0.7995. But following the Swiss KOF economic barometer data, the Franc weakened as data showed a drop in July, adding to signs the Franc’s rise may hurt the country’s economic growth. The monthly gauge that aims to predict the economy’s direction about six months ahead dropped to 2.04 from 2.23 in June. However, the rise of USDCHF to 0.8027was limited after U.S. core durable goods orders fell, bringing down the Dollar.
The Japanese Yen remained strong against the Dollar early into the European session, with USDJPY breaking a new four-month low by touching 77.56. The Dollar soon picked up from there and rose to a high of 77.89 as investors and importers took the opportunity to buy the cheaper Dollar, and sovereign banks also bought on dips. Also, investors fear the there will be a G8 intervention to halt the Yen’s appreciation. USDJPY retreated from the session high before the end of European trading after poor data on U.S. Durable goods orders weakened the Dollar.