The single currency rose broadly as European banks borrowed less money than expected from ECB, easing investors' worries over a liquidity shortfall and boosting risk appetite. However, euro pared its gains after Moody’s Investors Service said it placed Spain’s AAA government bond ratings on review for possible downgrade.
Although euro extended recent decline from 1.2490 high to 1.2151 on Tuesday, good buying interest at 1.2167 lifted the pair in Asian morning on Wednesday and euro later rallied to 1.2305 in European mid-day on active short-covering after ECB 3-month tender results were smaller-than-expected, easing concerns over European banks' funding issues. Banks borrowed 131.9 billion euros over three months, short of expectation in a Reuters poll for demand of 210 billion euros. Although euro retreated after the release of much weaker-than-expected U.S. ADP employment data, the single currency managed to bounce after the release of slightly better-than-expected U.S. Chicago PMI data, which came in at 59.1 in June (forecast was 59.0) versus the reading of 59.7 in May.
Euro later pared its gains, however, after Moody's placed Spain's AAA sovereign rating on review for possible downgrade due to deteriorating economic growth prospects, government's fiscal challenges and concerns over rising funding costs. Euro eventually ended the day at 1.2238.
Versus the Japanese yen, the pair rose from Asian low of 88.39 to 88.77 in European mid-day. However, the pair retreated sharply and fell to 88.36 in late NY session as U.S. ADP National Employment came in at 13,000, much lower than economists' forecast of 60,000. U.S. stocks fell sharply and closed the day down by 0.98% at 9774.02 on Moody's comments and the U.S. employment data.
The British pound remained under immense selling pressure on Wednesday due to cross-selling in sterling versus euro. Cable briefly bounced to 1.5075 in Asian mid-day but subsequently fell sharply from there and reached 1.4935 in NY session while eur/gbp rose from 0.8091 to 0.8228.
Economic data to be released on Thursday include: Japan Tankan capex , Tankan big manufacturing , Chinese PMI data, Swiss PMI, Germany Manufacturing PMI , U.K. Manufacturing PMI , U.S. Jobless claims, ISM manufacturing, Pending home sales, (Canadian market holiday).