Euro consolidated losses against the dollar during the U.S. session after a sharp drop earlier in the day as risk aversion was high ahead of the EU Summit. Disappointing German employment data and rising Spanish and Italian bond yields weighed on the single currency as hopes for EU leaders to agree on a solution to the debt crisis faded. Germany rejects the proposal for joint liability. The Summit goes on until Friday.
EURUSD fell 0.9 percent to 1.2406 in the Europe session where it stabilized. Markets already priced in their low expectations for the Summit so EURUSD is unlikely to fall further for now until more headlines come from the meeting. Short-covering towards the end of the session brought the pair back up to 1.2452 in the U.S. session.
GBPUSD extended losses in New York trading hours and tumbled to a three-week low of 1.5488. Weighing on the pound is the UK GDP data showing contraction in the first quarter. This increases the likelihood for more QE from the Bank of England.
USDJPY was little changed and mostly traded in a range after dropping to 79.21 early in the Europe trade and traded sideways, capped below 79.40. EURJPY fell to 98.31 in Europe and consolidated losses in the U.S. session.
The Canadian dollar weakened against its U.S. counterpart as risk aversion hurt commodity prices. Oil, which is a major Canadian export, fell by over US$3 today. Also U.S. data showed weakness in the economy, which further dampened risk appetite and led to safe haven flows to the greenback. USDCAD is up 1 percent on the day after surging to a three-week high of 1.0361.