EUR/USD: The euro continued to decline yesterday after it opened at 1.3380 and reached a low of 1.3162 by the New York session. The pressure on the euro was increased by the ongoing concerns relating to the EU summit results. Investors along with Moody’s credit rating agency felt that the outcome of the summit were not sufficient enough to drag the euro out of the debt crisis woes. Standard and Poor’s in fact put 15 EU sovereigns on downgrade watch adding further stress to the single currency. It opened this morning at 1.3186 and has continued to lose ground as the dollar strengthens across the board. It reached a low of 1.3160 followed by a brief jump above the open to 1.3210, but is currently back at 1.3180 as Moody’s credit rating agency announced a possible downgrade for eight Spanish banks. Moreover, there was an announcement that the new investment vehicle that China was forming could be put on hold to aid Europe unless conditions were met. Investors will be waiting for the German ZEW Economic Sentiment data later today and the US data and Fed meeting results. The Spanish and Italian bond sale is still scheduled for this week and will most likely capture investors’ attention.
GBP/USD: Opened yesterday’s session at 1.5652 and saw a volatile trading session when it sharply declined to a low of 1.5536 as market sentiment continued to worsen over a resolution to the euro zone’s debt crisis. The pair later retraced to highs of 1.5657 but upside gains were short-lived and the GBP/USD traded lower afterward to end the session at 1.5581. On Monday research from the Bank of International Settlements (BIS) suggested that additional quantitative easing from the Bank of England will not be adequate as it was in the past, which could have contributed to the sterling pressure. UK Prime Minister David Cameron continued to emphasize on Monday that the UK will not participate in the EU Treaty as it is not in the UK’s best interests to do so. Today the GBP/USD opened in Asia near yesterday’s close of 1.5582 and has since traded a little higher at 1.5615 before coming down to currently trade at 1.5588. The pair could see further volatility ahead of the UK Consumer Price Index at 09:30 GMT and the release of US Retail Sales at 01:30 GMT.
USD/JPY: The pair opened yesterday’s session at 77.66 and gained momentum throughout the day to reach an intraday high of 77.99 as risk aversion heightened prompting dollar buying among investors. Market participants grew more uncertain over the latest EU summit which failed to inspire confidence as it offered few new measures and no concrete action. Furthermore, credit rating agency Moody’s Investor’s Service cited on Monday that the outcome of the EU Summit meeting failed eliminate the risk of credit downgrades of euro zone nations. Fitch ratings agency was also reported to have announced that the European meeting did little to boost optimism in reaching an end to the region’s fiscal crisis. The USD/JPY held onto most of its gains yesterday and ended the session positive at 77.90. Earlier today it was reported that Japanese Finance Minister Jun Azumi urged Europe to implement additional measures to convince markets of its efforts to end the euro zone debt crisis, which has unsettled markets for two years. The USD/JPY opened in Asia at 77.90 and has since traded sideways, currently at 77.87. More volatility can be expected today for the USD/JPY pair ahead of the US Retail Sales at 01:30 GMT and the FOMC Meeting Announcement at 07:15 GMT in which the Federal Reserve could offer indications on its future monetary policy.
USD/CHF: Traded on an upside trend on Monday when the pair started off at 0.9251 and strengthened to an intraday high of 0.9387 supported by the risk off sentiment which continued to increase yesterday. The market dominating news with the EU summit meeting which disappointed investors, also failed to diminish the possibility of credit rating downgrades on euro zone countries. Market participants expect credit rating downgrades on European nations by Moody’s Investors Service and Fitch Ratings Service as early as this week. On Monday Moody’s placed eight Spanish banks on review for a possible downgrade, which heightened risk aversion and global uncertainty of an end to the euro zone’s debt crisis. This subsequently boosted dollar strength as investors turned to the safe-haven currency and the USD/CHF ended the session higher at 0.9371. Today in Asia the pair opened near yesterday’s close of 0.9370 and has since consolidated to a narrow trading range currently trading at 0.9376. The USD/CHF could take further direction ahead of the closely watched survey of German ZEW Economic Sentiment at 10:00 GMT and US Retail Sales data at 01:30 GMT. In addition, the FOMC Meeting will be held at 07:15 GMT and could add to dollar volatility as the US central bank could offer comments on its monetary policy.
Commodities
Oil: Opened at 99.41 and was forced lower throughout the day yesterday as concerns regarding the deteriorating global economic outlook grew. Analysts felt that the EU leaders had dashed investors’ optimism for a solution of the euro zone debt crisis as their resolutions were not going to be enough to tackle the issues in the long term. Oil dropped over 180 pips down to 97.55 and ended the New York session trading slightly higher at 97.88. It opened in Asia this morning at 98.14 and has been trading a tight range this morning between 97.65-98.03. The unrest in the Middle East has helped keep a floor on oil prices. Investors will be waiting to see the US retail data today as this may impact oil demand and any updates from the Fed’s meeting later this evening.
Gold: Traded down yesterday reaching a 7 week low. It opened on Monday morning at 1712 and lost 550 pips as the EU leaders disappointed investors with the outcome of the EU summit last week. Investors felt that the plans set forth by the leaders were not strong enough solutions to end the two year debt crisis. It opened in Asia this morning at 1663 and has continued to trade below the open as gold seems to have lost its “safe haven” status and has been grouped with the more risky assets. It found resistance at 1650 this morning and seems to be trading sideways around this level. Analysts will be waiting for updates on the US economic outlook from the Fed’s meeting tonight.
