Euro Selloff Continues
The euro declined against its US counterpart on Friday, as the EURUSD touched its lowest level in nearly two years following divergent economic releases from Germany and the United States.
The EURUSD tumbled 0.34 percent to 1.2707, the pair’s lowest level since November 2012. The pair is holding on to initial support at 1.2703. On the upside, resistance is ascending from 1.2790.
The euro came under renewed pressure on Thursday after ECB President Mario Draghi said he expects Eurozone economic growth to remain soft in the second half of the year.
The euro has tumbled 1.1 percent against the US dollar this week, as broad market forces kept the common currency in check. On Friday the euro’s losses were accentuated following divergent data releases from Germany and the United States.
German consumer confidence fell in October for the second consecutive month, as geopolitical and economic concerns weighed on sentiment.
GfK’s forward-looking consumer climate index declined in October to 8.3 from 8.6, the market research firm reported today.
Germans are concerned about “the ongoing tense geopolitical situation and economic weakness in a number of Eurozone countries,” GfK said in its press release. These factors “are likely to have a greater impact on the German economy in future.”
The German economy contracted in the second quarter, falling 0.2 percent. That was the first time Europe’s star economy had contracted since 2013.
The fall in German GDP was mostly responsible for the flat performance of the broader Eurozone, which is facing deflationary pressures and the threat of further economic stagnation.
Eurozone consumer prices increased 0.4 percent annually in August, prompting the European Central Bank to unleash a fresh wave of stimulus measures, including a further reduction in interest rates and a plan to begin purchasing asset-backed securities.
The European Commission’s statistics branch will release preliminary inflation data for September next week. Economists forecast inflation to ease to 0.3 percent in September.
Meanwhile, US data continued to pain a brighter picture of the US recovery. The US economy grew at an annual rate of 4.6 percent in the second quarter, revised government estimates revealed today. The upwardly revised estimate was due in large part to stronger contributions from exports and nonresidential fixed investment.
The Federal Reserve expects the economy to grow 2 percent to 2.2 percent this year, according to a revised summary of economic projections released last week alongside the official monetary policy statement.
Separately, US consumer confidence improved in September, reaching a 14-month high, according to the final reading of the Reuters/University of Michigan consumer sentiment index. The index rose to 84.6, the highest reading since July of last year, up from 82.5 the previous month.
The euro weakened across the board on Friday, consolidating at two-year lows against the British pound. The EURGBP declined 0.16 percent to 0.7800. The pair faces initial support at 0.7789 and resistance at 0.7835.
Meanwhile, the euro declined against the commodity-driven Canadian dollar, as the EURCAD fell 0.23 percent to 1.4133. The pair faces initial support at 1.4122 and resistance at 1.4191.
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