EURUSD trading was choppy today. For most of the European session, the Euro was falling against the Dollar following news that Spain’s Aa2 ratings were placed on review for possible downgrade by Moody’s. This heightened concerns of dent contagion in the Euro zone. These issues overrode the optimistic data from German Retail sales surged in June. Also, the U.S. debt issue was pushed aside as investors perceived the Euro to be riskier than the Dollar. However, that all changed close to the end of the session following weak GDP data from the U.S., causing the Dollar to slide against most counterparts. EURUSD fell to a session low of 1.4228 then jumped to a high of 1.4344 after the U.S. data.
Sterling fell against the Dollar most of the European session, exacerbated by Moody’s threat to downgrade Spain as well as poor U.K. data on housing and money supply. Risk aversion increased as investors began selling riskier currencies like the Pound. Data on housing does not improve the picture of the slow British housing market. Mortgage approvals and mortgage lending figures from the BoE this morning indicated low volume. Additionally, the U.K. released money supply data which showed that M4 supply growth was slow. From the European session open of 1.6326, GBPUSD fell to as low as 1.6260. However, weak GDP data from the U.S. battered the Dollar across the board, boosting Sterling to 1.6369 by the end of the session.
The Swiss franc hit record highs against the Dollar and Euro. Demand for the safe-haven Swiss currency was boosted by fear that political wrangling between U.S. lawmakers may lead the U.S. to default if they don’t raise the U.S. borrowing limit by Aug. 2. The Dollar fell to 0.7898 after data showed U.S. growth slowed to a 1.3 percent pace in the second quarter, well below expectations. GDP was also revised sharply lower for the first three months of 2011. This raised concerns about the U.S. economic health. Meanwhile, the Euro hit an all-time low at 1.1313 on concerns that a second bailout plan for Greece may not be enough to solve a growing euro zone debt crisis, after Moody’s threatened to downgrade Spain.
The Yen gained against the Dollar to reach a new four month high after U.S. GDP came out lower than expected, which adds to concerns about the U.S. economic recovery on top of the deadlock by Congress to raise the debt limit. The Japanese currency tends to do well during risk aversion and is one of the preferred currencies at the moment compared to the Euro and the Dollar, both haunted by debt issues and is perceived as a safe haven until a clearer picture arises out of the U.S. stalled debt talks. USDJPY touched down at 77.11. EURJPY fell to a two-week low to 110.37 as Euro was hurt by the Moody’s threat of downgrading Spain.