The North American trading session saw the euro trim some gains made earlier in the day when stronger-than-expected data from China and Germany gave investors some confidence in shifting back into riskier currencies. Also a well received Spanish, Italian and Greek Treasury bill sales. Also the EFSF debt auction went well despite the S&P downgrade on Monday and helped boost the single currency to rise for the first time since Friday. EURUSD peaked at 1.2806 in European trading.
But gains were capped with the opening of the New York markets, and EURUSD tumbled back down to 1.2712 as investors are still cautious with regards to the debt crisis still ongoing and believe today’s rally was a temporary correction to a downtrend. The single currency will once again be tested on Wednesday when Germany and Portugal hold debt auctions on Wednesday.
Meanwhile, the focus also turns to the Greek debt swap negotiations tomorrow. Greek Prime Minister Lucas Papademos is due to meet with representatives of private Greek bondholders after talks broke down last week in order to discuss a fifty percent debt haircut.
The British pound fell in the US session as speculation is growing that the Bank of England will expand its quantitative easing program by next month. The reason is due to slowing inflation. The UK inflation rate fell 4.2 percent from 4.8 percent in November, based on a report released today. GBPUSD dropped to 1.5319 in late New York trading from 1.5402.
The Canadian dollar remained higher versus its U.S. counterpart today compared to Monday after the Bank of Canada kept its key interest rate unchanged at 1 percent. Trading was choppy and the loonie soon trimmed gains. USDCAD edged back up to 1.0166 but was still lower than the Monday high.
USDJPY bounced off an earlier low of 76.54 to rise to 76.84 where it traded a range for the rest of the US session.