The Euro reversed its fall in the U.S. session to rise against the Dollar as investors appeared to be losing faith that the U.S. Congress will reach an agreement to raise the debt ceiling and cut public spending by the August 2nd deadline. This has caused a sell-off in the Dollar across the board, helping support the Euro, which was further boosted after disappointing GDP data indicating the poor economic health of the U.S. EURUSD soared from 1.4243 to 1.4412. However, this does not mean the Euro is out of danger, since Euro zone debt woes and contagion fears still continue to dog the currency, especially after a threat by Moody’s to downgrade Spain.
Sterling mirrored the Euro’s movements in the session and rose to a seven-week high against a broadly weaker Dollar following GDP data that gave evidence of sluggish growth in the U.S. which added to market jitters due to ongoing talks in Washington on a deal to raise the debt ceiling before an Aug. 2 deadline. Cable reversed the fall from the earlier session to jump 200 pips from 1.6271 up to 1.6469.
The U.S. Dollar accelerated losses against the Yen in New York trading, breaking past the four-month low earlier to reach 76.94 from the open of 77.62. This was the lowest level since soon after the March earthquake when the G8 intervened in the markets to weaken the Yen. Today traders were nervous that another intervention might occur soon since the BOJ and Finance Minister already gave warnings of the possibility. A surging Yen is detrimental to Japanese exports. The Yen has not been strengthening due to its own fundamentals but due to Dollar weakness, and as Finance Minister mentioned that the recent market moves are one-sided.
The Canadian dollar plumbed down to its lowest level in more than a week against the U.S. Dollar after Canadian and U.S. economic growth data fell below market expectations. Canada’s gross domestic product unexpectedly fell by 0.3 percent in May, despite expectations of an increase of 0.1 percent. Slow growth south of the border also affects the Canadian economy since the United States is a major trading partner. USDCAD jumped after the news to a high of 0.9589 from a low of 0.9504.
The Swiss franc continued to appreciate against the Dollar and Euro hitting record highs yet again, beating the highs reached in the prior European session. Investors were fleeing to safety due to mounting concerns about fiscal trouble and weak growth in the U.S and Euro Zone. After data showed U.S. growth slowed to a 1.3 percent pace in the second quarter, well below expectations, the Dollar plummeted against the Franc to 0.7863 from an early session high of 0.8006. EURCHF tanked down to 1.1297 from 1.1416 due to concerns of a Moody;’s downgrade of Spain.
Gold hit another record high in the U.S trading session after disappointing U.S. growth data raised the prospect of recession if a deadlock over the U.S. debt fails to be resolved quickly, pushing investors to the safe haven asset. Spot gold touched an all-time peak of $1,632.43 a troy ounce as Dollar plummeted. The two have an inverse relationship. Gold prices are expected to rise further until a deal is reached by the Republicans and Democrats. Should the U.S. default, prices will definitely be affected. Meanwhile, Euro zone debt contagion concerns are also supporting the precious metal.