The euro has been steady overall during European trading and hitting a three week high against the dollar at 1.3061. Earlier concerns over a Greek default due to stalled debt talks had initially weighed on the euro but those fears were soon outweighed by positive economic data. Euro zone PMI in the services sector climbed to the highest level in four months, giving some optimism that the region will avoid a recession. Meanwhile, a successful Spanish debt auction also helped underpin the euro.
EURUSD remained mostly supported at the 20 day Moving Average at the $1.30 level. With the overlap of the US session open, EURUSD began to reverse direction. Against the yen, euro climbed to a four week high to peak at 100.96 yen, steadily climbing from the European open level of 100.29.
Sterling fell to its lowest since late December against the euro, weighed down by fears of economic weakness that may prompt further monetary easing from the Bank of England. GDP data on Wednesday is expected to show the British economy contracted by 0.1 percent in the fourth quarter, which would add to fears that the economy is sliding into recession. EURGBP rose to a session high of 0.8389 before easing off. GBPUSD slid to a session low of 1.5543 before turning back up by the New York open.
The dollar surged to a four week high against the Japanese currency mainly driven by a boost in demand for the euro-yen pair but also due to a weaker yen following the Bank of Japan’s decision to hold policy and overnight interest rate steady, as well as cut its economic growth forecast. USDJPY soared to 77.72 from the European open of 77.00.
The focus turns to the outcome of the Federal Reserve policy meeting that starts later today. While no policy change is expected, the Fed will likely show that its policymakers do not expect to start hiking interest rates again in the short term.