The euro climbed against the dollar to gain over 130 pips in the European session, mostly lifted by a slightly improved market sentiment after euro zone PMI manufacturing data was not as bad as expected, which helped ease some of investors concerns about Europe’s economic situation. After recent turmoil in the markets and investors being cautious, they are eager to dip back into some risk. EURUSD opened the session at 1.4377 and rose to a high of 1.4500. European stock markets were also higher today, reflecting the overall positive market sentiment, which was aided by better than expected Chinese PMI data. Meanwhile, the markets are also focused on what the U.S. Fed will reveal on Friday regarding quantitative easing. There are expectations for more stimulus to be introduced.
Sterling gained against the dollar today as risk sentiment picked up in the markets today. Lack of important core U.K. economic data led the pound to take direction from the euro. Better than expected euro zone PMI data helped lift cable to 1.6571 from the European session open of 1.6474. Gains in the pound are expected to be capped since UK data later this week on retail sales and a second estimate of second quarter are both anticipated to drop, indicating the British economy’s lacklustre recovery.
The Swiss franc weakened against most of its major counterparts today as risk sentiment improved, thereby reducing demand for safe havens. Economic data from Europe and China indicated that manufacturing in these two major economies beat economists’ forecasts, showing investors that the outlook is not that gloomy. Meanwhile, investors are also expecting U.S. Fed Chairman Ben Bernanke to decide on further measures to stimulate the U.S. economy when he meets other central bankers in Jackson Hole, Wyoming this Friday. EURCHF climbed to a high of 1.1428 from the session open of 1.1332. USDCHF was more range bound after opening at 0.7882, trading between 0.7899 and 0.7851.
The yen gained against the dollar, as USDJPY continuously declined throughout the session down towards its record low hit last Friday. This kept Japanese finance officials on their toes. They have tried hard to keep investors from pushing up yen strength but it has been a difficult task since the dollar has been weakening, especially ahead of the Jackson Hole meeting on Friday when U.S. Fed Chairman is expected to hint on further quantitative easing, which will further weaken the dollar. USDJPY fell to a session low of 76.49 from the open of 76.78. EURJPY initially rose 111.08 but soon fell to 110.49.