Euro held in a tight range against the dollar, as did most other major currency pairs ahead of a key EU summit to be held on Thursday and Friday. There is little hope of any progress will be made to tackle the debt crisis especially after comments by German Chancellor Angela Merkel that debt liability will not be shared during her lifetime, meaning there will unlikely be a joint euro bond anytime soon.
A light economic calendar and limited news flow today kept EURUSD in a holding pattern but well supported above a two-week low of 1.2441 reached on Tuesday. The pair traded sideways between 1.2480 and 1.2502 during most of the European session but came under increased pressure going into the U.S. session overlap, falling to as low as 1.2469.
Sterling was briefly supported by strong CBI sales data, which printed the highest sales balance since December 2010. GBPUSD held supported above 1.5608 most of the session but the pound was mainly driven by the general mood of the market and fell to 1.5582 going into New York trading hours.
Against the yen, the euro was little changed in the European session, trading between 99.22 and 99.60 yen. Dollar gained only slightly against yen. USDJPY opened in Europe at 79.44 and edged up to 79.73. Yen is still supported by safe haven flows but remains vulnerable after the Japanese parliament proposed an increases in consumption taxes. This could weigh on the yen in the medium term.
The Australian dollar remains the best performer, gaining against the U.S. dollar during the European session. AUDUSD rose from 1.0044 to meet resistance at 1.0084, leaving the pair trapped in a range since yesterday. Aussie will likely remain range bound going into the EU summit tomorrow.