The euro eased its upside movement against the US dollar on Thursday, coming off one-month highs, after the release of a string of mixed economic data out of the Euro zone.
Having reached a fresh one-month high at 1.3618 at 9:00 GMT today, EUR/USD moved below the psychological level of 1.3600 to trade at 1.3592 at 12:34 GMT, gaining 0.10% for the day. Support was likely to be received at November 27th low, 1.3558, while resistance was to be seen at October 31st high, 1.3738.
Earlier in the day it became clear that confidence among industrial companies in the Euro zone increased for a seventh month in a row in November, with the corresponding sub-index coming in at a reading of -3.9, while the preliminary result pointed -4.5. The report by the European Commission also said, that the other component of the economic confidence index, the sub-index of consumer confidence in the region met the preliminary result, announced last week, which stated a reading of -15.4. The overall index of economic sentiment (ESI) in the common currency zone advanced to 98.5 in November, reaching its highest point since August 2011, after in October the indicator stood at 97.7.
At the same time, business confidence among manufacturers in Italy continued to improve in November. Industrial companies have been more optimistic about their orders, while companies operating in the services sector showed greater optimism as a whole. According to a survey of 4 000 business entities in Italy, the gauge of business confidence climbed to a reading of 98.1 in November, marking its highest level in two years. Octobers reading has been revised up to 97.4 from 97.3 previously, while expectations pointed that the gauge will advance to 98.0 during the current month. Manufacturers expectations regarding new orders have risen the most since August 2011, as back then Euro zones debt crisis triggered a political crisis in Italy.
However, the euro snapped its advance after another report said, that private sector loans in the Euro region continued to decrease in October compared to the same month a year ago, as Octobers drop has even exceeded the drop in September. Loans to private sector companies, one of the key indicators to facilitate a steady and continuing economic growth, declined 2.1% in October on annual basis, following a drop of 2.0%, recorded a month ago. Corporate lending shrank by 12 billion euros in October compared to September, after another 10-billion-EUR decline during September compared to August.
Despite the fact it has recently demonstrated stability, labor market in Germany might have faced certain difficulties in the month of November, as the number of people who applied for jobless benefits increased for a fifth consecutive month, while hiring slowed down. The number of jobless claims in the country rose by 10 000 in November compared to a month ago, which caused the rate of unemployment to remain steady at 6.9%, as had been projected by experts, and also near a record low.
Labor market outlook has probably been dampened due to the approved wage minimum and the tightening of regulations on hiring, as reported on Wednesday. Some experts warn that this may lead to a loss of job positions, especially in the smaller business sector in Germany. However, labor market in Euro zones largest economy still remains stable given the situation in other members in the region. The unemployment rate in the Euro bloc as a whole was reported to have risen to a new record high at 12.2% in October. Demand for the euro came under pressure upon the release of the above mentioned crucial data, regarding employment in Germany.
On the other hand, the euro managed to extend its third monthly gain against the US dollar, as a report revealed today that Spain’s annual harmonized index of consumer prices rose to 0.3% in November, after remaining flat in October, while the median estimate of 14 experts in a survey by Bloomberg pointed an inflation rate of 0.1%.
Lastly, it is expected that the European Union statistics office will report on Friday that consumer prices in the Euro region rose to 0.8% in November 2013 compared to November 2012, after rising to 0.7% during the preceding month. This report, as well as the upcoming inflation data out of Germany, are of utmost importance for the European Central Banks decision on monetary policy.
“The very weak reading on CPI last time led to an ECB rate cut, so the data will be closely watched,” said Noriaki Murao, the New York-based managing director of the marketing group for financial markets at Bank of Tokyo-Mitsubishi UFJ Ltd., cited by Bloomberg News. “The euro will be swayed depending on whether it will beat or trail expectations in a thin market.”
Meanwhile, the US dollar gained appeal yesterday after a report by Thomson Reuters and the University of Michigan revealed that the final reading of the gauge of consumer sentiment in the United States climbed to 75.1 in November from a final value of 73.2 in October. Expectations pointed an increase to 73.1 in November compared to the preliminary reading of 72.0, published on November 8th, which was also the lowest point since December 2011.
Additionally, also yesterday the Department of Labor reported that the number of initial jobless claims in the US, an indicator for lay-offs in companies, dropped by 10 000 to reach 316 000 during the week ending on November 23rd 2013, confounding preliminary estimates pointing that claims will climb to 330 000. The number of claims in the preceding week has been revised up to 326 000 from 323 000 previously.
Elsewhere, the euro was losing ground against the sterling, as EUR/GBP cross falling 0.19% on a daily basis to trade at 0.8323 at 13:00 GMT. EUR/JPY pair was gaining 0.29% to trade at 139.15 GMT at 13:00 GMT.