The euro managed to preserve its daily gains against the US dollar on Monday, as political deadlock in the United States continued and the nation was nearing a potential default on its obligations.
EUR/USD reached a session high at 1.3598 at 12:45 GMT, after which consolidation followed at 1.3593, gaining 0.39% for the day. Support was likely to be found at October 11th low, 1.3517, while resistance was to be met at October 4th high, 1.3631.
It became clear that negotiations between Barack Obama and House Speaker John Boehner broke down over the weekend. Bloomberg reported, that President Obama, in a phone call with House Minority Leader Nancy Pelosi of California, “reinforced that there must be a clean debt limit increase” and a stopgap spending measure also free of policy conditions, before budget negotiations were to begin. Both parties have been negotiating in order to avert nation’s default, after a lapse in borrowing authority takes effect on October 17th. After this date, the United States will have 30 billion USD plus incoming revenue and would start missing payments between October 22nd and October 31st, according to the Congressional Budget Office, which pressured demand for the greenback.
The euro, on the other hand, received support after earlier on Monday a report said that industrial production in the euro zone recovered in August, after having fallen significantly a month ago. This data came as another proof that economic recovery in the region was still frail after the prolonged recessionary period. Industrial output rose in most of the euro blocs countries, including Germany, where production registered a stable rate of increase. However, in Italy and Finland industrial output decreased. According to data by Eurostat, the index of industrial production rose 1.0% in August on a monthly basis, exceeding expectations of a 0.6% gain. In July the indicator fell 1.0%. On annual basis, however, output continued to slide in August, falling 2.1%, after the 1.9% drop in July.
Meanwhile, the euro was slightly lower against the pound, as EUR/GBP cross dipped 0.06% to trade at 0.8488 at 14:15 GMT. EUR/JPY pair was down 0.13% on a daily basis to trade at 133.39 at 14:15 GMT.