Forex Market Review – Euro gives up gains; sterling falls on weak GDP

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Euro fell from session highs against the dollar as risk aversion set in due to concerns regarding Greek debt and that the European Central Bank might have to take losses on Greek bonds. Early in the European trading session, the euro jumped after the German Ifo business climate index rose to its highest level in over four months.

EURUSD plunged from the session high of 1.3050 to a low of 1.2929. Euro fell against sterling from 0.8384 to 0.8308, while EURJPY fell from a one-month high of 101.87to 100.96.

The British pound dropped against the dollar after worse-than-expected GDP data indicated the UK economy contracted. This will pressure the Bank of England to introduce another round of quantitative easing next month, which would result in a weaker pound. During the London session GBPUSD fell from 1.5613 to touch as low as1.5534.

Yen extended losses against the dollar, following from news earlier today that Japan had recorded its first annual trade deficit since 1980. USDJPY rose to a two-month high of 78.22 from the European session open of 77.91.

The drop in market sentiment pushed the ICE dollar index higher. The Dollar Index, which tracks the USD against the currencies of six major U.S. trading partners, rose 0.6 percent to 80.304. The safe haven dollar gained against the Swiss franc, Canadian dollar as well as Australian dollar ahead of the Federal Open Market Committee’s first release of interest-rate forecasts later today.

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