The euro recovered all losses against the dollar when it was hurt by news of Spain’s downgrade overnight by S&P, down two notches to BBB+. Weak German Gfk sentiment data early in the European session dragged euro lower but it soon recovered after a well received Italian bond auction. There was initially some concern over rising Italian bond yields after a 10-year bond auction today, but soon markets calmed down on the view that the auction was well received and Italy met its sales target.
EURUSD fell early to 1.3156 but soon after it was all uphill to 1.3269. Gains in the euro were accelerated after weaker- than-expected US GDP data. This weakened the dollar, which is already being weighed down by a dovish Fed.
GBPUSD rose to a new seven-month high of 1.6257 driven by a weaker dollar . Sterling has gained over 2.5 percent against the dollar in the past week on speculation that the Bank of England will not likely expand quantitative easing, which is usually negative for the currency. The strong pound pushed EURGBP to a new 20-month low of 0.8132.
The Swiss franc strengthened against the dollar after Swiss National Bank Chairman Thomas Jordan said there were no plans to introduce negative interest rates to counter the strong Swiss franc and that the cap of 1.20 francs per euro was working well. The dollar fell further after weak US data showed slower growth. USDCHF fell to 0.9051 from an early high of 0.9132.
The yen gained back losses against the dollar and the euro. The Japanese currency initially fell after further easing measures from the Bank of Japan were announced today. But markets realized the measures were just an increment to the previous measures and not quite the bazooka that they were expecting. So it was not enough to push the dollar beyond its 11-month high of 84.16 yen hit last month. Earlier in Asia USDJPY hit 81.43 . The European session was volatile session, but the pair trended lower by the end of European trading hours, reaching a low of 80.48, further pulled down by weaker than expected US GDP data.
The Canadian was firm against the US dollar going into the North American trading session. The interest rate differentials between the two currencies due to shift to a more hawkish stance at the Bank of Canada and a stable and dovish tone from the Fed are the main drivers. USDCAD fell to 0.9817 from 0.9868.