The single currency fell sharply across the board on Wednesday on fear that a euro-zone debt crisis might spread beyond Greece. Besides, Greek workers' general strike and protests also indicated Greece might have difficulties in implementing the spending cuts.
Despite minor recovery to 1.2996 in European morning, the single currency retreated from there and later tumbled to an intra-day low of 1.2803 in US morning due to Greek debt contagion fears together with the weakness in European and U.S. stocks. Euro was also pressured by the news that Moody's said Portugal's AA2 ratings was on review for possible downgrade plus ECB's Weber's comments that Greece's financing on capital market is greatly endangered and Greek default would be a substantial risk for the stability of eurozone and financial system and serious contagion effects for other eurozone states. German Chancellor Merkel also warned the crisis could spread in Europe if the bailout package for Greece didn't succeed.
Despite cable's bounce to 1.5174, the pair then tumbled below Tuesday's low of 1.5090 to a five-week low against the dollar at 1.5068 in NY morning. Although the latest polls were showing Tories might come closest to winning the parliamentary election on the coming Thursday, two polls were pointing to a 'hung parliament' , which would leave the country a government too weak to rein its budget deficit.
The Japanese yen rose across the board as the debt contagion fears deteriorated the market sentiment, prompting investors to dump riskier assets for the yen as a safe-haven currency. Cross buying in yen helped the Japanese currency as eur/jpy slumped from 123.39 to 119.95 while aud/jpy fell from 86.55 to 84.67 and gbp/jpy tumbled from 144.03 to 141.24. Versus the Japanese yen, the greenback fell from 94.99 to 93.54.
Economic data to be released on Thursday include: New Zealand Unemployment, Australia Retail sales, Australia Trade balance , Swiss CPI , U.K. Services PMI , Germany Factory orders, EU ECB rate decision, U.S. Jobless claims, Productivity, Canada Ivey PMI and Building permits.