Despite continued narrowing in euro zone yield spreads and rebounds in US and European equity markets, the euro was unable to muster any sort of sustained rally. After being capped by offers from the BIS at 1.2740 earlier in Europe, EUR/USD made one attempt to rally, reaching 1.2710 briefly after rumors of an upbeat report on the European economy from a US consulting firm made the rounds.

The rally was very short-lived and reports soon surfaced that the BIS had lowered its offers to the 1.2690/00 area. Losses accelerated below 1.2665 which had provided an intraday base for a time this morning. Stops were triggered at 1.2660, 1.2640 and 1.2620 on the way to 1.2618 session lows, where we end.Traders wonder openly who might be using the BIS to cover their tracks. Odds are being laid that LatAm central banks and/or the SNB are making use of their good offices.

Sentiment remains bearish but nervous. Traders fear being lured into shorts and then being squeezed via intervention. The longer the ECB waits, the tougher their job becomes.

The pound traded lower today as the BOE inflation report was more dovish than expected and Governor King would not rule out a return to QE. The pound fell as low as 1.4819 late in the day. EUR/GBP reached 0.8544 on heavy Swiss buying during the European afternoon before ending at 0.8514.

USD/JPY rallied to the high 93.20s on firmer US interest rates and on the solid rally in US equities. It drifted off those highs, dragged down by EUR/JPY weakness as EUR/USD went out on its lows. The cross ends at 117.50, in the middle of the day’s range.

Commodity currencies were range-bound, trying to decide whether to react to the rally in precious medals or the selloff in industrial medals and other commodities. AUD ends at 0.8515 and USD/CAD at 1.0195.

EUR/CHF traded soft but traders noted ongoing talk of protection of 1.4000 barriers in the cross.