The euro edged lower against the US dollar on Tuesday, as the greenback remained supported by the upbeat US data, released at the end of last week, which boosted the view of a possible sooner than projected scale back of Federal Reserve Banks quantitative easing.
EUR/USD slipped to a session low at 1.3372 at 8:40 GMT, after which consolidation followed at 1.3378, losing 0.21% for the day. Support was likely to be received at November 8th low, 1.3318, while resistance was to be met at November 11th high, 1.3416.
The common currency has been under selling pressure since last Thursday, when the European Central Bank, at its meeting on policy, decided to reduce borrowing costs by 0.25% to a new record low level of 0.25%. The central bank also maintained its deposit rate at zero and pared the marginal lending rate to 0.75%. The odds increased that the bank may consider using unconventional tools such as quantitative easing or a negative deposit rate, in case consumer prices in the Euro region continue slowing down or the economic recovery remains frail.
A report today showed, namely that German annualized final index of consumer prices (CPI) slowed down to 1.2% in October, the lowest level in three years, as a month ago the index stood at 1.4%. Nations annual CPI, evaluated in accordance with the harmonized methodology, also decelerated in October, reaching 1.2%.
Germanys annual wholesale price index recorded a 2.7% drop in October, following another 2.2% drop in the preceding month. On a monthly basis, the index fell 1.0% in October, neutralizing the 0.7% gain in September. This inflation data suggested that demand in the Euro zone was still facing difficulties.
Additional selling impulse for the euro was submitted on Friday, when Standard & Poor’s underscored that France’s slower economic growth would restrain government’s ability to improve public finances. Nation’s long-term foreign and local-currency rating was reduced by one step to AA from AA+. The country has lost its top rating at Standard & Poor’s in January 2012.
Also on Friday, French industrial output was reported to have shrunk 0.5% in September compared to August, after a month ago it climbed 0.7%. Experts had projected that output will improve 0.1% in September. Manufacturing production in the country fell 0.7% in September on a monthly basis, following a 0.9% gain in August.
EUR/USD cross is seen to drop to 1.3300 before the end of 2013, and depreciate even further, to 1.3100 by the end of the first quarter of 2014, according to the median estimate of 81 economists, participated in a survey by Bloomberg News.
Meanwhile, since Thursday last week the US dollar has been continuously supported by the strong economic reports, that came out from the United States. On Friday the Bureau of Labor Statistics said that employers in the country unexpectedly added more job positions than projected in October. Non-farm payrolls increased by 204 000 in October, well above the expected 120 000 new jobs and above the revised up number of 163 000 jobs, added in the previous month.
On Thursday another report revealed that US economy expanded at a steeper than expected rate during the third quarter of the year. The Gross Domestic Product rose at an annualized rate of 2.8% in Q3, following the 2.5% expansion in Q2, which marked the best quarterly performance this year.
Markets awaited Janet Yellens confirmation hearing on November 14th for the position of Chairwoman of the Federal Reserve Bank, with investors assessing whether the world’s largest economy is sufficiently resilient, so that the central bank may begin paring back its stimulus.
Elsewhere, the euro was gaining positions against the pound, as EUR/GBP cross rose 0.20% on a daily basis to trade at 0.8404 at 9:29 GMT. EUR/JPY pair was gaining more, 0.35%, to trade at 133.42 at 9:32 GMT.