Euro steadied against the dollar during the Asian session, retracing slightly as it was due for a bounce after a sharp decline on Monday following Spain’s borrowing costs reaching record highs. EURUSD opened in Asia at 1.2574 and edged up to 1.2615. Gains were limited ahead of a Spanish debt sale today.
A number of key events this week will keep market participants cautious. Euro zone finance ministers will meet on Thursday to discuss the details of the Spanish bank bailout and debate proposals on how to deal with sovereign debt crisis. Failure to take any decisive measures towards a banking and fiscal union will keep euro and risk correlated currencies struggling to extend any gains. Meanwhile, the US Fed will announce the outcome from its policy meeting on Wednesday. Markets are expected to react positively if the Fed undertakes steps to stimulate the sluggish US economy.
GBPUSD bounced from 1.5664 to 1.5690 but further gains were capped ahead of key UK economic data due later today on inflation.
USDJPY has been range bound since yesterday. During Asian trading the pair traded down from 79.09 to 78.92, while EURJPY was due for a correction after a sharp decline yesterday, trading up from 99.46 to 99.65.
Aussie hovered near a one-month high, with AUDUSD trading between 1.0102 and 1.0138. There was little reaction after the RBA released minutes of its June 5 meeting at which policy makers cut the overnight cash-rate target to 3.5 percent, the lowest since 2009.