EURUSD was on an uptrend for most of the European session after erasing losses from the earlier Asian session. Investor sentiment was lifted due to speculation that Greece will no longer seek a referendum. After Greek Finance Minister Evangelos Venizelos said he opposed the referendum, Greek Prime Minister George Papandreou called an emergency cabinet meeting for tonight. Euro gained 1.3 percent to hit an intraday high of 1.3834. Meanwhile investors focus is shifted to the European Central Bank interest rate announcement. The ECB unexpectedly cut rates by 25 basis points to 1.25 percent from 1.5 percent and this led EURUSD to drop 57 pips in minutes to 1.3721 from 1.3790. Investors are waiting for Mario Draghi’s first press conference as ECB President, taking over from Jean-Claude Trichet, to see what outlook he has for the European economy.
GBPUSD was lifted due to the EURUSD rise but continued to rise even though euro fell after the ECB rate announcement. Investors are left with few safe haven currencies as yen and the Swiss franc are not favoured anymore and after the Fed policy statement last night, the US will not further ease policy and support growth the dollar may not be as favourable, so investors now turn to the sterling. GBPUSD rose 0.8 percent in the London session to peak at 1.6037. Traders ignored weak UK services PMI data.
USDJPY traded lower as on-going risk aversion help the yen recover ground versus the dollar. Investors turned to the safe haven yen and ignored BOJ intervention threats since the Europe debt crisis was more dominant in driving markets today. The dollar is weak after the U.S. Federal Reserve said it would keep rates near zero until 2013. USDJPY opened in Europe at 78.03 and drifted lower to hit a session low of 77.88. EURJPY initially rose on a rebounding euro but soon fell after the ECB rate cut. Session high was 107.89, then EURJPY turned down to 106.98.
USDCHF declined on more upbeat sentiment early in the European session, falling 1.2 percent to a session low of 0.782 but rose to 0.8782 after the ECB rate cut. EURCHF advanced 0.2 percent on a broadly stronger euro to rise to 0.2166, but fell after the rate announcement.
The Canadian dollar was driven by European headlines as there was lack of domestic Canadian data. The loonie gained 1.4 percent against the greenback on risk appetite in early European trading as well as rising crude oil prices. Canada is a major oil producer and so its currency is affected by commodity prices. USDCAD fell to 1.0053 from 1.0195 but soon rebounded after the ECB rate cut.