The euro dipped early in the session versus the dollar to 1.4325 from a 1.4403 open as a result of a Swiss National Bank announcement that it was increasing liquidity in the markets to curb franc strength. The result was contrary and caused a euro sell off as markets expected tougher SNB measures. Also sovereign debt concerns resurfaced after a disappointing Franco-German summit yesterday. However, euro soon recovered and rebounded, aided by Middle-East buyers. By the end of the session EURUSD hit highs of 1.4507 lifted by improved market sentiment after positive U.S. economic data showing industrial output increased as well as earlier euro zone inflation data which came out in line with expectations.
Sterling fell against the dollar after the Bank of England released Monetary Policy meeting minutes that disclosed a unanimous vote to keep interest rates unchanged at 0.5 percent. Worse-than-expected UK unemployment data accelerated the decline to 1.6347 from 1.6454. Cable rebounded on the back foot of euro, climbing alongside EURUSD, resulting in GBPUSD paring losses and hitting a high of 1.6527.
EURCHF lost all gains made in the Asian session to fall from a high 1.1534 down to 1.1219 following a Swiss National Bank announcement that disappointed markets which had positioned for more radical measures, such as direct intervention or pegging the currency to the euro. However the SNB merely decided to boost liquidity by expanding sight deposits to 200 billion Swiss francs from 120 billion francs. USDCHF also fell from an early high 0.8009 to a session low of 0.7823.
EURJPY opened Europe at 110.39 but fell on concerns that a European financial tax plan will slowdown growth. Franco-German summit on Tuesday disappointed markets by rejecting a joint euro bond issuance and instead decided on a financial tax. Meanwhile, the SNB falling short of its plan to peg the euro to the Swiss franc also disappointed markets and pushed investor to sell euro and invest in the safe haven yen. EURJPY soon rebounded to 110.91 as market sentiment improved aided by U.S economic data on increased U.S. production dismissing dears of a double dip recession.