Euro continues its gains against Dollar as S&P Downgrade of Japanese rating lifts USDJPY to 1 week high

The Euro today has hit yet again another 2 month high, making today
the 5th consecutive day in which the Euro has reached 2 month peaks.
The start of the session saw the Euro take a sharp dip of some 75 pips
but later quickly recoup these losses as it rallied some 115 pips. The
high was reached in late European session at 1.3757 further to a Euro
zone policymaker, Lorenzo Bini Smahi, expressing concern with regards
to inflationary pressures as an expected rise in the imported goods
inflation could not go un-noticed. This statement further backed the
popular view that the Euro zone may need to raise its interest rates
sooner than was previously anticipated. The Euro was given an
additional boost today further to comments from French President
Nicolas Sarkozy, in which he stated that France was "fully
determined to defend the Euro" and warned against those who were
looking to bet against the single currency as he made clear that
abandonment of the Euro was out of the question. The Euro momentarily
rose past its 61.8% Fibonacci retracement level, at 1.3741, of its
November 4th to January 10th descent but failed to sustain this level.
The Sterling continued on from yesterday on the back of a rate hike
expectation from the Bank of England following yesterday's BoE
minutes which showed a closer than expected decision with regards to
the recent release of the BoE interest rates. Today's European
session saw the Sterling gain over 50 pips to see it trading above its
61.8% Fibonacci retracement level, at 1.5933, of its November 4th to
December 28th decline and trade around the 1.5958 level for the mid
part of the European session. The market appears to have a hawkish
outlook on the Sterling, choosing to focus on the positive impact of
the BoE minutes and not get too concerned with the weaker than
expected GDP.

The EURGBP pair has experienced a volatile session in which the pair
continued from yesterday's trend to see the pair dropping following
a one week incline which saw the Euro gain over 3 pennies on the
Sterling (between the 18th and 26th of January). The pair dropped some
30 pips in early European session before bouncing back around 08:45
GMT to reach today's high of 0.8628 – a high that was short lived
as the cross pair continued its decline to trade around the 0.8602
level.

The Swiss Franc gained today, pushing the USDCHF pair to a 3 week low
of 0.9389, hurting Switzerland's exporters with an expectation of a
slower growth this year for the country. The pair experienced a rather
volatile European session with oscillations ranging more than 70 pips.

Today's announcement by Standard and Poor to lower the Japanese
Sovereign rating one notch lower to a "AA-"from a "AA" sent
the USDJPY pair soaring some 100 pips to a 1 week high of 83.19. S&P
also lowered the long-term counterparty credit ratings on four
domestic insurance companies: Tokio Marine & Nichido Fire Insurance
Co. Ltd, Tokio Marine & Nichido Life Insurance Co. Ltd, MassMutual
Life Insurance Co. and Allianz Fire and Marine Insurance Japan Ltd.
The pair has remained at the elevated level throughout the European
session trading around the 82.92 level with oscillations of +/- 20
pips.
Source: Fxstreet.com