Forex Market Review – Euro falls below $1.25; caution ahead of EU Summit

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Euro extended losses against the dollar during the European Session, falling back below $1.25, as investors are being cautious ahead of the two-day EU Summit on June 28-29.  Most summits in the past have disappointed and not produced any concrete solutions to tackle the euro zone debt crisis so many market participants are losing hope for any positive outcome during the upcoming summit.


Meanwhile, Spanish bond yields are still high and the government today has formally requested the EU for aid to to help recapitalize Spain’s troubled banking system.


EURUSD opened in Europe at 1.2522 and dipped to 1.2470, down 0.6 percent since Friday.


Sterling is weak against the dollar, having lost 0.2 percent since Friday. The growing likelihood of more QE from the Bank of England is weighing on the pound. GBPUSD fell to a session low of 1.5537 from an early high of 1.5584. Sterling however gained against a weaker euro, pushing EURGBP to a low of 0.8019.


Yen gained strength versus the dollar as a result of heightened risk aversion. The Japanese currency is perceived as a safe haven currency and has rallied 0.7 percent since Friday’s close. USDJPY fell to 79.55 in European trading from the session open of 80.15. EURJPY tumbled from 100.38 to 99.37.


The Canadian dollar is trading lower than its U.S. counterpart due to low risk appetite today. Lack of key data on the economic calendar is keeping the dollar broadly stronger as the overall market sentiment is damp.


Aussie  is down 0.5 percent so far, falling below parity as AUDUSD edged down to 0.9988 in Europe.