Forex Market Review – Euro bounces from 2-year lows by German data; Ireland vote in focus

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Euro bounced in the European session, moving off two-year lows against the dollar. Some positive German data helped the single currency recover some losses after employment data showed Europe’s largest economy has proved resilient amid the decline of employment across the rest of Europe. Germany’s unemployment rate hit a euro-era record low, at 6.7 percent in May against a forecast 6.8 percent rate. Some euro zone economies have unemployment rates as high as 15 percent or even 25 percent.


EURUSD opened in Europe at 1.2391 off a two-year low of 1.2357and climbed to a high of 1.2427 before easing slightly. However, the euro’s rally could prove short lived as concerns grow over Spain’s banking crisis and Greece’s debt. Meanwhile, market participants are cautious as Ireland holds a referendum today on a European fiscal treaty. Expectations of an Irish vote in favour of Europe’s fiscal pact is currently helping support the euro above two-year lows but beyond this the outlook is fairly bearish as there is little on the horizon to provide sustained support.


Sterling held steady against the dollar during the London session, pausing after a sharp selloff the previous day GBPUSD fell to a four-month low of 1.5461  in Asian trading before recovering to 1.5524.  The pound slipped against the euro as selling in the single currency eased today. EURGBP was 0.25 percent higher against the pound at 80.14, recovering from a two-week low of 79.70 pence struck on Wednesday. However, despite the bounce, euro remains vulnerable to selling pressure.


USDCHF traded away from 15 month highs at 0.9718 from overnight and eased to a Europe session low of 0.9664 as the dollar was sold off going into the European return due to a bounce in risk currencies. Data today showing an increase in Swiss first quarter GDP helped lift the Swiss franc.


USDJPY was mixed during the session, mostly unchanged from the Europe open toward the US session, trading between 78.75 and 78.88 but slightly off a 3-1/2 low of 78.70 reached in Asia. EURJPY bounced off a 4-month low of 97.34 and rose to 98.01 as euro recovered across the board in the European trade.


Looking ahead to later today, US jobs data are due from ADP. Also on Friday the most closely looked non-farm payrolls are out.