In US trade, the euro pushed above the 1.26 level, as traders speculated that the Fed would be forced into more stimulus measures and as rumours circulated that central banks were exploring co-ordinated liquidity measure should there be a ‘run on the banks’ next week in the wash up from the weekend’s Greek election.
Continuing weak US economic data (rising jobless claims and soft retail spending) coupled with deflationary-like consumer price and producer price inflation readings, had traders positioning themselves for some form of stimulus package ahead of next week’s FOMC meeting. This saw the USD weaken at the expense of the risk currencies. Later in the US session, risk currencies were further bolstered after Reuters reported that central banks were discussing co-ordinated liquidity measures to shore up confidence, should markets have a deeply negative reaction to the weekend’s Greek election.
Having ended yesterday’s Australian session around the 1.2575 level, the euro surged to end US trade at 1.2633. Upon reopening for the Asian session, the euro has pared some of its overnight gains to be currently trading in the low-1.2620s.