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EUR/USD stabilizes despite weak Eurozone data

H.S. Borji
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The euro stabilized against its British and US counterparts Monday, as a dearth of economic data kept trade volumes light despite concerning evidence the Eurozone recovery faced another setback in October.

In economic data, Eurozone investor sentiment fell in October to its lowest level in 17 months, underscoring concerns about the region’s economic recovery.

The Sentix investor confidence index, which gauges institutional investor sentiment about the Eurozone economy, declined to -13.7 from -9.8. Economists forecast a smaller drop to -11.5.

Separately, German factory orders declined in August at the fastest rate since 2009, raising concerns Europe’s biggest economy was struggling to regain momentum after a disappointing second quarter.

German factory orders declined 5.7 percent in August, following a 4.9 percent gain the previous month, the Bundesbank reported today. Economists forecast a monthly drop of 2.5 percent.

Year-on-year, factory orders were down 1.3 percent, official data showed.

Germany contracted 0.2 percent in the second quarter, weighed down by a shaky Eurozone economy and escalating tensions between Russia and the West over the former’s perceived involvement in Ukraine.

The euro was nevertheless supported on Monday as investors remained on the sidelines ahead of key economic and policy developments later in the week.

The euro edged higher against the British pound, as the EURGBP reached an intraday high of 0.7862. The pair would subsequently consolidate at 0.7848, advancing 0.17 percent. The technical charts show initial support likely found at 0.7816. On the upside, resistance is ascending from 0.7857.

The UK had no data to report on Monday. On Tuesday the Office for National Statistics will report on manufacturing production and industrial production for the month of August.

Manufacturing production is forecast to rise 0.1 percent in August, translating into an annualized gain of 3.4 percent, according to forecasts. Industrial production, a broader gauge of factory activity, is forecast to increase 2.6 percent annually.
Separately, the National Institute of Economic and Social Research will provide an estimate of UK GDP growth. UK gross domestic product is forecast to increase 0.6 percent in the three months through September, a sign the economy was beginning to cool in the third quarter.

The euro advanced against an idle US dollar, as the EURUSD rebounded from an intraday low of 1.2509 to reached 1.2559. That represents a daily gain of 0.38 percent. The technical charts show initial support at 1.2453 and resistance at 1.2564.

The US dollar has a light release schedule this week. However, several regional Federal Reserve Bank presidents are scheduled to speak at various venues throughout the week, potentially giving investors clues about the future of US monetary policy. On Wednesday the central bank will release the minutes of the September Federal Open Market Committee policy meetings, which resulted in a further reduction of quantitative easing.

Economists expect the Fed to begin lifting interest rates in the first half of next year, although the exact timing is less certain. The central bank has held its benchmark lending rate at 0.25 percent 2008.

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