The euro edged higher against the US dollar on Tuesday, but upward movement seemed limited, following the speech by ECB President Mario Draghi yesterday and in expectation of the crucial German business climate indicators, scheduled for release later in the day.
EUR/USD reached a session high at 1.3514 at 7:14 GMT, after which consolidation followed at 1.3512, gaining 0.14% on a daily basis. Support for the pair was expected at September 23rd low, 1.3478, while resistance was to be met at September 23rd high, 1.3544.
On Monday the common currency was pressured after the speech by Mario Draghi, who said that the European Central Bank was to use every instrument at its disposal, including a new set of long-term refinancing operations, which could facilitate an increase in liquidity, in case interest rates tend to obstruct banks monetary policy.
This statement followed the series of PMIs in the sectors of manufacturing and services out of Germany, France and the Euro bloc as a whole. It became clear that business activity in the single currency zone increased more than expected in September, with the services PMI rising to 52.1 in September, after a reading of 50.7 in the month of August. At the same time, the preliminary manufacturing PMI for the Euro zone slowed down to 51.1 in September, after it hit a 25-month high in August at 51.4.
Later on trading Tuesday the IFO will release its business climate indicator for Germany, as median estimates pointed an increase to 108.0 in September from 107.5 in August. Values above the key level of 100.0 are usually an indication of optimistic prospects regarding business conditions in the country. Better than projected results may certainly provide support to the euro.
Meanwhile, New York Fed President Dudley said yesterday that US economy “still needs the support of a very accommodative monetary policy,”, while his Atlanta counterpart Dennis Lockhart stated that monetary policy should stress on creating a more dynamic economy after a recent cooling in economic growth. The Federal Reserve Bank said last week that it wanted more evidence of a sustained economic recovery to be obtained before making a decision to adjust the scale of its asset-purchasing program. This decision came as a surprise to global markets, as most experts had anticipated a reduction of the monthly pace of stimulus by 10 billion USD.
Elsewhere, the euro was higher against the pound, as EUR/GBP cross added 0.23% to trade at 0.8431 at 7:43 GMT. EUR/JPY pair was gaining 0.37% to trade at 133.90 at 7:44 GMT.
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