EURUSD declined to below Friday’s levels as the euro is facing pressure as Italy now takes the spotlight from Greece. Investors are wary with the political turmoil in Europe that is putting the debt crisis at risk. Greece managed to get on track by agreeing to set up a new coalition government and now Berlusconi’s governmnet is under pressure to fall. The Italian/German 10-year government bond yield spread hit its widest levels since 1997 today, which is causing great concern since Italy is the euro zone’s third largest economy. EURUSD fell 0.6 percent to a session low of 1.3680, pushed down by a series of weak economic data showing retail sales and investor confidence fell more than forecast. Euro briefly rebounded but is expected to remain under pressure until more developments come out of Italy.
GBPUSD regained losses from the previous session bouncing to 1.6077 from 1.5992. Sterling also gained against the euro which was weighed by Italy debt concerns. EURGBP fell to 0.8557 from 0.8596.
EURCHF jumped almost 1 percent on the day still reacting to comments from Swiss National Bank officials that the SNB would take steps beyond the current franc cap to protect the Swiss economy if deflationary risks increase. Currently there is a floor of 1.20 francs to the euro. EURCHF rose to 1.2266 and USDCHF rose 1.8 percent on the day to peak at 0.9029. Both pairs soon eased down facing key resistance levels and due for correction.
USDJPY continues to make small movements and is supported above the key psychological 78.00 level. The pair opened Europe at 78.14 and edged lower to 78.02 as euro zone debt concerns continue to roil investor nerves. EURJPY fell to 106.83 from 107.55.
Gold prices hit a fresh six-week high as debt troubles in the euro zone sparked demand for the metal as a perceived safe haven. Gold gained 1.4 percent on the day so far, peaking at $1,778.37 in European trading.