The European trading session was highlighted by the downgrade of Japan's credit rating by S&P. FX traders will now turn their attention to the US with the release of industrial data this afternoon.

Earlier today S&P announced it is downgrading the credit rating of Japan to AA minus from AA, citing high fiscal deficit expectations. The yen was hit hard across the board with the USD/JPY climbing to its highest level in two weeks.

At lunchtime of the European trading session, the USD/JPY was trading higher at 82.95, off from its daily high of 83.20. The pair opened the day at 82.14. The EUR/USD was trading up at 1.3730 from 1.3702. The AUD/USD was down at 0.9920 after opening at 0.9962.

Risky assets were sent lower, with crude oil prices and the Aussie Dollar falling as well. Despite the sell-off, the EUR/USD rallied late in the morning to test a two month high. The GBP/USD was also trading higher as the pair has recovered 70% of Tuesday's losses following the release of disappointing 4Q GDP numbers.

Later today traders will be focusing on the release of US core durable goods orders due to be published at 13:30 GMT along with weekly unemployment claims and pending home sales. Should these reports provide results better than economists' expectations, higher yielding assets such as the Aussie dollar and crude oil may recover from this morning's selling.