The euro traded lower against the US dollar on Thursday, continuing this movement from yesterday, following congressional testimony by FED Chairman Bernanke, where he left room for a possible delay in the monthly bond purchases, depending on economic data.
EUR/USD fell to a session low at 1.3091 at 5:29 GMT, after which consolidation followed at 1.3102. Support was expected to be received at July 16th low, 1.3049, while resistance was to be met at July 16th high, 1.3173.
On Wednesday in his semi-annual testimony before the Financial Services Committee, FED Chairman Bernanke said that monetary policy was not on a “preset course”, as bond purchase tapering was dependent on how economy performed. The easing program could be tapered at a faster pace, slower pace, or even temporarily increased if economic conditions allowed so. Ben Bernanke said last month that the Federal Reserve may start to trim asset purchases by the end of this year and exit the program around the middle of 2014, if the economy meets central banks forecasts for economic growth of 2.3% to 2.6% for 2013, while unemployment rate expected to fall to 7.2% – 7.3% during the fourth quarter of the year.
However, some experts had a different view on the matter. Bloomberg reported, that Michael Feroli, chief US economist for JP Morgan Chase & Co., given his estimate for a 1% rate of expansion during Q2, US growth would have to exceed a 3% rate during the second half of the year in order to meet FED’s growth objective for the whole year.
In addition, St. Louis-based Macroeconomic Advisers LLC revised its forecast and now expects that economy grew at an 0.7% rate in the second quarter on annual basis, down from a 1.7% estimate at the beginning of July, according to Bloomberg. US economy expanded by 1.8% during the first quarter.
Bernanke’s remarks, also emphasizing the risks to the economy brought by federal budget cuts and slowing growth of economies overseas, shot Treasuries and US shares higher, while investors reduced their bets the Federal Reserve Bank would begin to pare its asset purchases this September.
Also, yesterday the Beige Book report, containing the recent estimate, regarding economic conditions in 12 federal districts, did not present any surprises. Data matched the results from the last report in June and implied that economic situation continued to improve at a moderate pace. Demand for construction sites gave support to manufacturing in the 12 major regions, while consumer spending rose. Demand for new loans and loan characteristics also showed improvement. The report also said that hiring was revitalizing, despite the modest results, regarding full-time employment.
Elsewhere, the euro advanced against the British pound, as EUR/GBP added 0.14% to 0.8641 at 7:20 GMT. On the other hand, EUR/JPY cross rose by 0.49% to 131.36 at 7:22 GMT.
Last but not least, the Euro zone was expected to release data on the Current Account later in the trading day.
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