The euro advanced to session highs against the US dollar during late European trade, following a report, showing that US housing starts registered a sharp decrease in June, and after FED Chairman Bernanke said the central bank still expected to start tapering its asset purchases by the end of the year, but monetary policy was not on a “preset course.”
EUR/USD reached 1.3176 at 12:30 GMT, currently the session high, after which consolidation followed at 1.3160. Support was expected at July 16th low, 1.3049, while resistance was to be encountered at July 11th high, 1.3205.
Earlier on Wednesday a report stated that housing starts in the United States dropped by 9.9% during June, reaching an annual 0.836 million units, the lowest value of the indicator since August 2012, as mostly apartment construction weighed on this overall result. Experts had projected an increase to 0.950 million units, compared to 0.928 million units during the preceding month, a revision up from 0.914 million units previously. Construction of single-family houses registered a 0.8% drop in June. Annually, however, housing starts rose by 10.4%, reflecting stability in economic recovery. On the other hand, concerns over rising interest rates could cause a negative impact upon the housing market in the country.
In addition, building permits also decreased in number in June, falling by 7.5% to 0.911 million units, compared to 0.985 million units in May, according to revised data, while preliminary estimates pointed an increase to 1.000 million units.
In his prepared testimony to the Financial Services Committee in Congress, Federal Reserve Chairman Ben Bernanke did not introduce any new directions, regarding monetary policy. He said that the scale of monetary stimulus was not on a “preset course” and depended on that how economy performed. Thus, if economic growth strengthened, the easing program could be tapered at a faster pace, while in case of the opposite situation, deteriorating economic results, the scale of asset purchases could be even increased. The Chairman also mentioned that, given the low inflation rate, the central bank was ready to act if necessary, in order to maintain price stability and keep inflation close to the targeted annual rate of 2%.
Meanwhile, in the Euro zone, construction output shrank by 0.3% during May on a monthly basis, following the 1.0% increase in April. In annual terms, construction slowed down its contraction rate, falling 5.1% in May, compared to a 6.8% drop in April. Residential buildings construction decelerated by 0.1% in May, after the 4.3% decrease a month ago.
Elsewhere, the euro traded lower against the British pound, as EUR/GBP cross dropped by 0.56% to 0.8636 at 13:57 GMT. On the other hand, EUR/JPY cross traded steadily, rising by 0.10% to 130.59 at 13:57 GMT.
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