On Friday, the euro fell to a four-session low against the dollar after data showing a drop in euro-zone inflation forced the European currency to give up much of its gains from earlier in the week.
The euro declined nearly one cent to an intraday low of USD1.2620. That was the lowest since USD1.2565 on Nov. 24 and compared with USD1.2707 late Friday in New York. Against the yen it dropped about JPY1.2 to JPY120.16, a level unseen since Nov. 24. The euro later recouped some of its losses against its U.S. and Japanese counterparts. Speculators in Asia covered short-euro positions to lock in gain as caution set in over the scheduled release this week of key U.S. economic indicators plus the Big-Three U.S. automakers' corporate-rebuilding plans.
Pound tracked the Euro lower slipping below 1.53 briefly before recovering on the back on US stock gains to end the week well supported. UK data continued to be very weak with CBI retail trade survey falling to -46 to -27. GBPUSD traded with a low of 1.5260 and a high of 1.5448 before closing the day at 1.5415.
The Japanese Yen tracked the equities during the day although struggled to capitalize on the improved risk sentiment as crosses weighed the USDJPY down.
The Australian dollar was softer in Asia trading late Monday as a worsening stream of economic numbers out of the region weighed on demand for growth proxy currencies like the Aussie. The weakness in high yield currencies comes despite an emphatic recovery in global equities markets last week and points to the possibility of more pain for the Australian unit in weeks ahead.
Market expectation
The euro extended its losses in Asia on Monday, briefly falling to one-week lows versus the dollar and the yen on growing speculation that the European Central Bank may deliver a large interest-rate cut later this week.
The euro is continuing its slide Monday that carries over from last week. Dealers expect support at USD1.2650, with any gains likely capped at USD1.2800.
EUR slips a little against USD, JPY after German October retail sales data show 1.6% on-month fall, widely missing economists' forecast for 0.5% rise. Also, EURUSD support now at USD1.26 on technical charts, which keeps speculators eager to try downside breaks, say traders.
EURGBP is holding between stg0.8245/75. Early demand in Europe has allowed rate to extend recovery to stg0.8286, currently holding around stg0.8272. Support noted at stg0.8250/45, a break below to open a deeper move toward Friday's lows at stg0.8225, with bid interest noted between stg0.8225/15. Through here and rate can ease toward stg0.8200. Resistance placed at stg0.8285/95, a break above stg0.8300 to allow for a move on toward stg0.8315/20.
Markets generally expect that on Thursday, the European Central Bank will cut rates to 2.5% from 3.25%, and the Bank of England to 2.0% from 3.0%. Investors also anticipate a reduction of 75 to 100 basis points in Australia on Tuesday and up to a 150-basis-point cut in New Zealand on Thursday.
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