EUR/USD reaches new 23-month highs on Fed expectations, before US consumer sentiment

The euro climbed to a new 23-month high against the US dollar on Friday, as the greenback continued losing ground against peers due to expectations that the Federal Reserve Bank may postpone its plans to taper stimulus until next year.

EUR/USD hit a session high at 1.3833 at 4:30 GMT, also the pairs highest point since November 2011, after which consolidation followed at 1.3810, gaining 0.07% for the day. Support was likely to be received at October 22nd low, 1.3792, while resistance was to be encountered at November 9th 2011 high, 1.3858.

Expectations mounted that the Federal Reserve will probably maintain the current pace of its stimulus program for longer, especially after the recent string of disappointing economic data, released out of the United States. The Department of Labor reported that the number of people who filed for unemployment assistance in the US dropped by 12 000 to reach 350 000 during the week ended on October 19th 2013. Preliminary estimates pointed that the number of initial jobless claims will drop to 340 000, while preceding week’s results have been revised up to 362 000 from 358 000 previously. This data followed the non-farm payrolls report on Tuesday, as it said that the private sector added fewer than expected job positions in September.

According to another report, US manufacturing activity increased at the slowest pace during the past one year in October, as factory output contracted for the first time since the fall of 2009. Markit Economics said, that the preliminary value of the manufacturing PMI decreased to 51.1 in October, reaching its lowest level since October 2012, as in September the PMI stood at 52.8.

The report on new homes sales has not been released yesterday and is now scheduled for December 4th.

All these data points, added to concerns over the potential impact on US economy by the 16-day government shutdown, caused selling pressure upon the greenback against major rivals.

“We’re continuing to see the dollar get sold,” said Akira Moroga, a Tokyo-based manager of currency products at Aozora Bank Ltd., cited by Bloomberg. “the consensus view is that December tapering is becoming less likely. The euro is supported as the economic picture there improves and investors seek an alternative to the dollar.”

At the same time, according to the median estimate by experts, the Thomson Reuters/University of Michigan index of consumer confidence for the United States probably decreased to a reading of 75.0 in October, marking the lowest point since January, after in September the index came in at 77.5. The preliminary value for October was 75.2. Official data is scheduled for release later in the day.

Meanwhile, the Ifo institute may report that its business climate index for Germany probably rose to a reading of 108.0 in October, reaching the highest level since April 2012, as in September the gauge stood at 107.7. This index provides key information regarding economic development in the country in the upcoming months. Values above the 100.0 level are considered as signaling positive business prospects. Better than expected results will certainly heighten the appeal of the euro.

Having gained against the greenback on Thursday, the euro pared gains during the same day, after it became clear that manufacturing activity in the Euro zone as a whole, measured by the corresponding PMI, showed a slight improvement in October compared to September, as the index climbed to a preliminary value of 51.3 from the final value of 51.1 last month. Single currency blocs services PMI slowed even more, reaching 50.9 in October from 52.2 in September.

Elsewhere, the euro was steady against the sterling, as EUR/GBP cross gained 0.04% to trade at 0.8523 at 7:41 GMT. The United Kingdom is to release data on its Q3 advance Gross Domestic Product within the next hour.

In addition, EUR/JPY pair was losing 0.12% on a daily basis to trade at 134.11 at 7:41 GMT.