The Euro slid against the Dollar after the release of disappointing Euro zone Services PMI data which declined more than expected in June and for the third straight month. Also, increasing speculation that China will be raising interest rates soon spread concern amongst investors for the world’s powerhouse, causing them to shift to safer currencies such as the US Dollar and Swiss Franc. EURUSD, which had already slid 90 pips overnight, fell further in European trading hours compared to the Asian session high of 1.4552. However, the expected ECB rate hike on Thursday should limit the Common Currency’s downside.
Sterling was given a much needed boost after better than expected Services PMI increased in June to 53.9 versus the predicted drop to 53.6 from May’s 53.8. After a spate of continuous poor data recently, today’s data was a breath of fresh air. GBPUSD surged 138 pips from a low of 1.5989 to hit a high of 1.6127. Meanwhile, EURGBP plunged to 0.8975 from 0.9048.
The safe haven Swiss Franc gained against the Euro following weak EZ Services PMI data which gave rise to concerns over the economic outlook in the Euro zone. EURCHF dropped from 1.2296 to 1.2204. The Swissie also gained against the Dollar by 63 pips with USDCHF falling from 0.8491 to a European session low of 0.8427.
USDJPY opened the European session at 80.01 and rose to 81.17 within an hour, extending its rise since the Asian session. Two factors lifted the USD. One was from sovereign buyers and Japanese importers who were buying the Dollar while it was still low, and factor two was rising concerns that China will raise interest rates by this weekend which doesn’t bode well for China’s growth outlook. This dampened risk appetite, shifting demand to safer currencies like the Dollar and away from high yielding currencies like the Japanese Yen.
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