Downgrades of both Greece and Portugal by the S&P sent a shudder through the markets, sending the Euro to fresh one year lows against the greenback in an almost 25 drop for the currency. The opening of the trade day in Asia saw the EUR/USD hit lows of 1.3143 after Standard and Poors dropped Greece’s debt rating to junk status, also cautioning that future downgrades were sure to come if conditions continue to deteriorate in the troubled nation. The downgrades also sent global equities tumbling, quashing any demand for risk heading into Asia. Japan’s Nikkei 225 shed almost 2.50% over the course of the day.
The EUR/USD was able to bounce off of early lows, eventually crossing the 1.3215 line for session highs, but the moves were mostly attributed to short covering and the mood was unquestionably dour for the European currency heading into the London session. XAU/USD failed to follow the Euro move off of lows and remained mired near the $1165.00 per ounce level. Most other risk currencies made modest gains in Asia after substantial falls in late NY. EUR/JPY was able to regain almost 100 lost pips when it hit a 123.30 high late in the day, and GBP/JPY had a similar gain, touching 142.65 after early 141.68 lows. While the yen crosses all made moves higher, the USD/JPY remained range bound between 93.00 and 93.34 in subtle trading.
The AUD/USD enjoyed a boost from a 0.9% CPI data release, up from last month’s 0.5%, the stronger data helped to fan the flames that the RBA could in fact raise rates once again at the next RBA meeting. The AUD/USD grew from 0.9135 to touch a 0.9230 high on the possible rate hike expectations. AUD/NZD broke through 1.2910 on the upside but was beaten back to levels near 1.2870. The RBNZ will make its rate decision early tomorrow and the consensus is that rates in New Zealand remain unchanged at 2.50%. As well, keep in mind that tomorrow brings the FOMC rate decision, and while that is widely expected to remain unchanged at <0.25%, traders will be looking once again for a change in the “extended period” language the FOMC has become so comfortable with.