Euro dipped briefly in the European session, down 65 pips against the dollar to a low of 1.4352 as the optimistic sentiment from the Greek confidence vote faded when a lot of people perceived the confidence vote overnight as nothing more than a stop gap measure. However, the Single Currency soon rebounded, being supported by a weaker Dollar as the market’s attention has now switched to a U.S. Federal Reserve policy statement and a news conference by Fed Chairman Ben Bernanke to be held later today. The focus will be on any comments on the slowing U.S. economy.
Sterling fell broadly to a six-week low against a basket of currencies, after Bank of England minutes showed policymakers judged the growth outlook had weakened and some believed more stimulus may be needed. The minutes signalled UK interest rates were unlikely to rise from their record low 0.5 percent this year and there seems to be a greater chance of more quantitative easing. Against the dollar, sterling plummeted 170 pips from a 1.6261 high down to 1.6092. The Euro is poised to test its June 8 high of 0.8974 against the Pound, as EURGBP rose steadily to 0.8933 in the session.
The Swiss Franc briefly weakened against the Dollar to lose 22 pips after data showed Swiss investor confidence dropped significantly in June. Survey results from the Center for European Economic Research (ZEW) and the Credit Suisse indicator for economic expectations fell 12.8 points from a month earlier to minus 24.3 in June. The Franc soon rebounded against the less popular greenback as it is a safe haven currency during these uncertain times when the U.S. Fed announcement is expected to have a dovish tone since U.S. economic data have recently been on the weaker side indicating a slumping economy. USDCHF fell to 0.8402 by the end of the session.
Against the yen the dollar extended losses, edging down from a high of 80.32 down to 80.07. The USDJPY pair is mostly affected by US fundamentals such as the delayed US recovery. The markets are anticipating continued monetary easing by the Federal Reserve and expectations of lower GDP growth forecast and this is helping support the Yen against the greenback.
Note: Daylight Saving Time in effect for GMT