The euro advanced against the US dollar on Friday, after data showed US non-farm payrolls disappointed in December, raising concerns the Federal Reserve may have to reconsider the pace of scaling back its monetary stimulus.
EUR/USD reached a session high at 1.3684 at 15:00 GMT, after which it closed at 1.3669 on Friday, adding 0.45% for the day. Support was likely to be received at January 9th low, 1.3549, also the pair’s lowest since December 5th, while resistance was to be met at January 9th high, 1.3633.
On Friday, the greenback was heavily pressured after a report showed the US non-farm payrolls disappointed in December with only 74 000 hired workers, while analysts estimated that employers will add 195 000. Last month payrolls advanced at the slowest pace since January 2011, while payrolls increased by upwardly revised 241 000 from 203 000 in November.
However, the rate of unemployment in the country dropped significantly, reaching 6.7% in December from 7.0% in the preceding month, which marked the lowest rate since October 2008. However, this came as a result of a larger percentage of US citizens leaving nation’s work force. Preliminary estimates pointed that US unemployment rate will remain unchanged in December.
On Thursday, Fed minutes of the December meeting revealed decreasing economic benefits from the bond-buying program, which increased bets that Fed policy makers might extend reductions in their monetary stimulus program in the near future. The Federal Reserve Bank said on December 18th that it will reduce its monthly bond purchases in January to $75 billion from $85 billion.
Also on Thursday, the US Labor department reported the initial jobless claims for the week ended January 4th decreased to 330 000 from 345 000 in the previous week. Analysts had expected the number of people who file for unemployment benefits will decrease to 335 000 people.
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 dollar, in December 2014.
Meanwhile, the euro received some support on Friday, after Eurostat released a report that showed the final GDP in the euro zone increased by 0.1% in the third quarter, unchanged from its preliminary reading in November and in line with analysts expectations.
However, the 18-nation common currency was pressured on Thursday, following Mario Draghi’s comments that inflation expectations are well-anchored and inflation may remain low for a prolonged period of time. The ECB President reiterated that the central bank will maintain its accommodative monetary policy, with interest rates remaining at current or even lower levels for a long period of time. He also reminded that the ECB has a wide range of instruments, which have not been used so far.
On Tuesday, official data showed the annual rate of inflation in the euro zone slowed to 0.8% in December, after 0.9% in November, which boosted concerns over the threat of deflation in the common currency area.
The European Central Bank announced a widely expected decision to keep interest rates unchanged at 0.25%. The central bank also kept the deposit facility rate unchanged at zero and the marginal lending rate at 0.75%.
EUR/USD cross may be influenced by a number of reports, scheduled for publication during next week, as follows:
On Monday (January 13th), the US will report its Federal Budget Balance for December, which may increase to $44.3 billion, after it declined to -135.23 in November.
On Tuesday (January 14th), in the US, reports on retail sales, core retail sales and the import index for December will be released. Meanwhile, the euro zone will report its industrial production in November.
On Wednesday (January15th), the US Producer Price Index will be published, while no important reports are expected to be released in the euro zone.
On Thursday (January 16th), the US Labor Department will publish the number of initial jobless claims for the week ended January 11th, accompanied by reports on the Consumer Price Index and the Philadelphia FED index. Meanwhile, Eurostat will report its Harmonized Index of Consumer Prices for the euro zone.
On Friday (January 17th), in the US the Preliminary University of Michigan Confidence index for January will be released, while no important reports are expected to be released in the euro zone.
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