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Euro down and Dollar up

Euro down and Dollar up

Risk remains very much the driving force for FX markets as they fret about the extent of slowdown in the US economic recovery and the state of the global economy. Concerns about Eurozone peripheral economies have also intensified again, putting additional pressures on the euro and preventing it from benefiting from Friday’s news of stronger than expected Q2 GDP growth.  As result we have the weaker EUR and stronger USD.
As a whole the single currency zone expanded by 1.0%, but in truth this was the aggregate of a range of performances. Greece contracted by 1.5%, while Spain managed a 0.2% rise. In fact few countries were in touching distance of Germany’s performance. Risk aversion support therefore sees the dollar start the week at close to one month highs to the euro which trades at just below $1.28, and the Dollar has clawed back much of the ground given to Sterling over the last fortnight, back to 1.5550.
The yen has become the risk currency of choice and was broadly firmer after news late last night of weaker than expected Japanese Q2 GDP growth, with Japanese GDP in the second quarter showing just a 0.1% expansion rather than the expected 0.6%, adding to concerns about the global economy. The yen was also supported by Japanese exporters’ demand but gains are being tempered by fears of intervention. Speculation that the authorities might make some response to yen strength has been heightened by news that the government and BoJ could meet towards the end of the week to discuss the currency and the economy.

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