The euro was trading steadily against the US dollar on Wednesday, after the release of downbeat trade balance data out of the United States, while concerns over a possible military campaign against Syria by the US were still present.
EUR/USD touched a session high at 1.3185 at 10:46 GMT, after which consolidation followed at 1.3166, dipping 0.04% for the day. Support was expected to be found at July 19th low, 1.3090, while resistance was to be encountered at September 2nd high, 1.3227.
Earlier today an official report said that US trade deficit widened more than projected to 39 147 billion USD (13.3% increase) in July, following the deficit figure of 34 543 billion USD in June. Experts had anticipated a lesser deficit at the amount of 38 600 billion USD. The report made clear that American consumers have purchased more foreign automobiles, toys, household appliances during July, which suggested a gradually recovering economy, while the weaker performance of foreign economies led to diminished demand for US goods and services. US Import figure rose by 1.6% in July compared to a month ago, reaching 228.59 billion USD and at the same time, export decreased by 0.6% to 189.45 billion USD. However, this higher import figure in July, following the sudden drop in June, implied that consumer spending was recovering at a moderate pace. Consumer expenditures contributed to about two thirds of the US GDP. On the other hand, decreasing export might be a sign that global economic growth was still weak, despite recent signals of improvement in several foreign economies. The average value of export and import during the past three months, indicators considered as lacking seasonal effects, showed a certain increase in July.
Meanwhile, concerns over a possible military campaign against Syria by the United States continued to make its mark on market sentiment after some congressional leaders, including Republican House Speaker John Boehner and Democrat Nancy Pelosi expressed their intentions of backing President Barack Obama’s initiative for a military strike. Additionally, US Representative for Virginia’s 7th congressional district, Erik Cantor also expressed his support for a resolution by the Congress, which to approve the use of military force in the Middle East.
In the euro zone, data by Eurostat today showed that retail sales rose at an insignificant rate in July compared to June, by 0.1%, while in July 2013 compared to July 2012 sales dropped by 1.3%. Both figures were below preliminary estimates. A separate report said that the Gross Domestic Product in the single currency zone gained 0.3% during Q2 compared to Q1, while the annual GDP was revised up to a drop of 0.5% during the second quarter of the year from a 0.7% drop previously. Euro blocs GDP result was supported by increased domestic demand and stronger export. Among the released economic indicators earlier on Wednesday, the final value of German services purchasing managers index (PMI) advanced to 52.8 in August from a preliminary reading of 52.4 and euro zone’s services PMI decreased to 50.7 in August from a preliminary estimate of 51.0. Values above the key level of 50.0 are considered as an indication for increased activity in the sector.
Elsewhere, the euro was lower against the sterling, as EUR/GBP cross was losing 0.28% for the day to trade at 0.8443 at 14:21 GMT. EUR/JPY pair was gaining 0.05% to trade at 131.23 at 14:22 GMT.
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