The Euro was able to recover broadly during the European session but its outlook remains fragile. The Single Currency managed to bounce back following news of Ireland’s downgrade to junk status by Moody’s yesterday, apparently supported by upbeat GDP data from China. There were growing concerns that the Euro zone debt crisis would affect global growth but after the Chinese data, these fears have eased. Meanwhile, the Eurogroup of finance ministers have planned a summit on Friday, giving some optimism to the markets that some kind of solution for dealing with the debt crisis will be reached. Sovereign buying and short-covering pulled up the Euro to 1.4109 from Tuesday’s one-month low of 1.3836 against the Dollar.
Sterling fell across the board following worse than expected unemployment data which showed the number of Britons claiming unemployment rose higher than forecasted. The news added to concerns that the UK economy is still sluggish, especially after a series of weak economic data recently. Sterling fell around 45 pips against the dollar to a session low of 1.5906 within a minute of the news but soon recovered to 1.5965 well above five-month lows reached yesterday. The Pound has been affected by risk aversion and has been on the back foot of the Euro, and consequently rebounding in the European session along with the Single Currency. However, Sterling traded lower against the Euro due to the weak UK jobs data, with EURGBP spiking up over 20 pips against the Pound to 0.8840 from 0.8819.
The Swiss Franc halted its seven-day rise against the Euro. EURCHF moved off the all time low reached yesterday at 1.1551 to trade up to a session high of 1.1720. Recently demand for the safe haven Swiss currency increased as the debt situation in the EU peripheral economies increased fears of debt contagion as Italy’s debt has now come to the surface. Risk appetite picked up slightly following news overnight showing that economic growth in China exceeded analyst estimates giving optimism that not the whole world is in gloom. Also, FOMC minutes last night showed that some US policy makers felt additional stimulus may be needed. This supported the Dollar against the Franc at 0.8279.
The Yen’s rise against the Dollar stopped following a huge spike down in USDJPY to 78.47 just as the Asian markets opened today. This was the Yen’s strongest level since the March earthquake hit Japan. Then Yen’s rise has made the markets cautious of a possible intervention by the Bank of Japan. Speculation increased after Japanese Finance Minister Yoshihido Noda said Yen moves have been “a bit one-sided.” General risk aversion due to the Euro zone debt crisis have recently pushed investors into the safer Yen. However, a strong Yen is detrimental to export competitiveness. USDJPY looks supported at 79.12.
Note: Daylight Saving Time in effect for GMT