The euro traded steadily against the US dollar on Friday, as fears arose that the budget deadlock among US policymakers may lead to a government shutdown.
EUR/USD touched a session high at 1.3501 at 6:07 GMT, after which consolidation followed at 1.3496, gaining 0.06% for the day. Support was likely to be found at September 18th low, 1.3338, while resistance was to be encountered at September 23rd high, 1.3544.
On Thursday an official report showed that US final Gross Domestic Product, a major indicator for overall economic activity in the country, rose by an annualized 2.5% in Q2, confirming the revised rate of growth, published last month. Analysts had projected that economy will expand by 2.6%. Concerns appeared that the global economic slow down was influencing recovery in the country. Indeed, a sustained recovery was what the Federal Reserve policymakers wanted to see before taking the first step to pare the monthly pace of monetary stimulus from the current level of 85 billion USD.
At the same time, the Senate of the United States plans to vote today on a spending bill, 3 days before federal spending authority runs out and a few weeks until the country reaches its borrowing limit. US President Barack Obama and congressional Republicans are deadlocked over the federal budget in a confrontation which could lead to a government shutdown within days. Republicans are insisting that continued spending after the current budget’s September 30th end date be contingent on reducing the funding of president’s health-care law, while Barack Obama has rejected such a proposal. Such a dispute was seen as threatening the next set of negotiations over whether to increase the 16.7 trillion USD borrowing limit, which, according to the US Treasury Department, will be reached by October 17th.
Meanwhile, the euro was also put under pressure, following the comments by European Central Bank Executive Board member Benoit Coeure, who said the bank had room to reduce the benchmark interest rate further, in case of necessity, but it did not target a concrete level for money market rates.
Later in the day, the Euro zone was to release data on economic sentiment, while Germany will show the preliminary value of its index of consumer prices.
Elsewhere, the euro was losing ground against the pound, as EUR/GBP cross fell 0.23% to trade at 0.8392 at 7:33 GMT. EUR/JPY pair was losing 0.26% on a daily basis to trade at 133.19 at 7:35 GMT.
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