EUR/USD trades in proximity to 1-month lows on record high euro zone unemployment

The euro declined against the US dollar on Wednesday as data showed unemployment in the euro zone remained at a record high in November.

EUR/USD touched a session low at 1.3583 at 10:53 GMT, losing 0.24% for the day. Support was likely to be received at January 6th low, 1.3572, also the pair’s weakest since December 5th, while resistance was to be met at January 7th high, 1.3656.

A report by Eurostat showed the unemployment rate in the euro zone remained unchanged at a record high 12.1% in November, also in line with analysts forecasts. The jobless rate remains largely unchanged for a seventh consecutive month.

EU leaders focused their attention on the labor market as they try to bolster economic recovery form the longest euro zone recession. In December they acknowledged that the unemployment rate remains at unacceptably high levels, mainly among young people, 1-1/2 year after they uncovered an ambitious program worth 120 billion euro to foster the economy and create new job positions.

“The euro-area economy isn’t growing fast enough to significantly reduce unemployment, this isn’t going to change anytime soon, with annual growth rates of about 1 percent this year and in 2015,” said Evelyn Herrmann, an economist at BNP Paribas SA in London, cited by Bloomberg.

According to ECB estimates the euro-area economy will grow 1.1% this year, after it contracted 0.4% in 2013, while a Bloomberg survey among economists predicted that unemployment will average 12.1% in 2014 and 11.8% a year later.

The German Statistical Office, Destatis reported that the seasonally adjusted trade surplus of the largest euro zone economy widened to 17.8 billion euro in November from 16.7 billion month in the previous month. Analysts had expected the surplus to reach 18.9 billion euro.

The euro received some support after a report by Eurostat revealed that retail sales in the euro zone surged by 1.4% in November, after a decline of 0.1% in October. Analysts predicted the euro zone retail sales will increase by mere 0.1%. Year-over-year retail sales increased 1.6% in November, after registering a drop of 0.3% in the previous month.

Meanwhile, the greenback was supported after the US Commerce Department reported on Tuesday that the US trade deficit narrowed to $34.25 billion in November, defying analysts’ projections that the trade deficit will widen to $40.00 billion. In October the US trade deficit was downwardly revised from $40.64 to $39.33 billion.

Data showed that the US imports declined 1.4% to $229.1 billion, while exports rose 0.9% to a record high $194.9 billion.

Investors awaited the release of the Federal Reserve minutes from its last meeting and a report by the ADP research institute on the number of workers added in December in the US private sector.The report may show that the US private sector added 200 000 workers in December, after gaining 215 000 in November.

The recent upbeat data reinforced speculation that Fed might decide to taper its stimulus program further, providing further support to the greenback.

The Federal Reserve Bank said on December 18th that it plans to reduce its monthly bond purchases in January to $75 billion from $85 billion. According to the median estimate of economists surveyed by Bloomberg on December 19th, the Federal Reserve may reduce the purchases in $10 billion increments over the next seven meetings, before ending the program, which tends to devalue the US currency, in December 2014.

“Assuming the economic recovery plays out as we expect, we will likely continue to reduce the pace of those purchases, and eventually eliminate them, over this year,” said yesterday San Francisco Fed President John Williams, cited by Bloomberg.

Elsewhere, GBP/USD touched a session high at 1.6429 at 09:12, gaining 0.17% for the day. On January 2nd the pair touched 1.6604, the strongest since August 2011. Support was likely to be received at January 7th low, 1.6375, while resistance was to be encountered at January 7th high, 1.6438.