The euro continued trading higher against the US dollar during the late phase of US session on Friday, after a report showed that activity in US industrial sector contracted in October, while Fed Chair-nominee Janet Yellens dovish remarks still weighed on greenbacks demand.
Having climbed to fresh daily highs at 1.3505 at 14:16 GMT, EUR/USD cross closed at 1.3497 on Friday, gaining 0.29% for the day. Support was likely to be received at November 14th low, 1.3418, while resistance was to be met at November 6th high, 1.3548.
According to a survey by the Federal Reserve Bank for New York, manufacturers in the region said that business conditions deteriorated in November, as new orders and shipments decreased. The index, gauging activity in manufacturing, dropped to a reading of -2.21 in November, marking its first negative value since May. In October the index came in at 1.52. Values below zero are usually considered as an indication that activity in the sector has contracted. Preliminary estimates pointed an increase to 5.00. The sub-index of new orders plunged to -5.53 in November from a reading of 7.75 in October. The gauge for shipments fell to -0.53 this month from a value of 13.12 a month ago. Labor market conditions in the region probably worsened, as the sub-index of employment dropped to 0.00 in November from 3.61 in the preceding month.
Accompanying the above mentioned data, industrial output in the United States was reported to have unexpectedly decreased 0.1% in October compared to September, marking its first monthly drop since July, as sectors of mining and utility services contracted. Expectations pointed a 0.2% expansion in production during October. US mining sector shrank 1.6% in October, following six consecutive months of gains. Manufacturing output, a major component of the overall industrial output, climbed 0.3% in October, which marked a third consecutive monthly gain. The rate of capacity utilization slowed down to 78.1% in October from 78.3% in September, while projections pointed a rate of 78.2% in October.
At the same time, the index of import prices declined 0.7% in October compared to a month ago, or the sharpest pace of decrease since June 2012, after a revised down 0.1% uptick in September. Experts had anticipated that the index will fall less, by 0.5% in October. This monthly drop has been facilitated by lower oil prices, as the latter fell 3.6% in October compared to September. Oil is a major component among the imported fuels in the country. In annual terms, import prices in the United States decreased 2.0% in October, after another 1.0% drop in September. Decreasing prices of imported goods usually indicate that foreign demand is fading, while slowed economic growth in other nations worldwide will most likely keep inflationary pressure at low levels.
These data points came as another evidence to bolster the case that continuing monetary stimulus is still needed.
Federal Reserve Chair-nominee Janet Yellen told the Senate Banking Committee on Thursday that as US economy was beginning to show progress, rates of inflation and unemployment still have more room to approach central banks targets. Market players considered such comments as rather dovish, as it seemed Fed policymakers wanted further solid proof of economic improvement before making a move towards reduction of monthly asset purchases. It is expected by economists, that the central bank will taper its stimulus program as early as March next year.
Meanwhile, also on Friday, it became clear that the harmonized consumer price index in the European Union (EU) slowed down to a four-year low in October. According to data by Eurostat, the CPI in the region climbed 0.9% during the 12 months through October, but slowing down in comparison with the rate, registered during the 12 months through September, which was 1.3%. What is more, this result appears to be the weakest since October 2009. The data boosted concerns that the EU might probably head towards a continuous period of deflation.
In addition, the final annualized rate of consumer inflation in the Euro zone reached 0.7% in October, or the least since November 2009, which confirmed the preliminary rate, announced by Eurostat on October 31st. On a monthly basis, the final harmonized CPI dipped 0.1% in October, meeting expectations.
Elsewhere, having reached a session high at 0.8387 at 13:52 GMT, EUR/GBP cross closed at 0.8372 on trading Friday, dipping 0.04% on a daily basis. EUR/JPY pair registered a session high at 135.32 at 21:32 GMT, after which ended the week at 135.22, gaining 0.45% for the day.