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Euro Cuts Losses as CPI Moderates at 0.5%

H.S. Borji
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Euro Cuts Losses as CPI Moderates at 0.5%

The euro was little changed against its US counterpart Thursday, snapping a two-day losing streak as Eurozone inflation stabilized at low levels in June.

The EURUSD was at 1.3527, unchanged from its previous close, after trading within a narrow range of 1.3521-1.3540. The pair faces initial support at 1.3505 and resistance at 1.3560.

The EURUSD is currently trading near the 100-day moving average (1.3528).
The pair fell below the 1.36 handle in the first half of the week amid disappointing Eurozone figures, headlined by declining German economic sentiment. The EURUSD has declined nearly 0.6 percent since Monday.

In economic data, Eurozone consumer prices moderated at low levels in June, a sign the European Central Bank may hold off on implementing a quantitative easing campaign designed to lift inflation levels.

Eurozone inflation increased at an annual rate of 0.5 percent in June, the European Commission reported today. The June figure was unchanged from May.
Economists forecast no change for the month of June.

Month-on-month, consumer prices increased 0.1 percent, as expected by the consensus. Consumer prices had declined 0.1 percent in May.

Inflation fell in Greece, Portugal and Slovakia. Only five of the 18 Eurozone member-states had inflation rates at or above 1 percent, including Germany where inflation rose 1 percent annually.

So-called core inflation, which strips away volatile elements such as food and energy, increased at an annual rate of 0.8 percent, following a 0.7 percent increase in May.

The European Central Bank left interest rates unchanged at the July policy meetings.

According to ECB Governing Council member Ardo Hansson, the central bank won’t rush to purchase asset-backed securities any time soon, a sign the ECB has adopted a wait-and-see mentality after cutting interest rates to record lows and introducing a negative deposit rate at the June policy meetings.

Hansson said quantitative easing is a “medium-term plan” that could be considered “somewhere down the road.”

June marked the ninth consecutive month Eurozone inflation was below 1 percent – a level ECB President Mario Draghi describes as the “danger zone.”
Deflation is a major impediment to economic growth, and could trigger a cycle of declining consumer spending.

The ECB will close out the week with May’s current account balance.
In US data, the housing recovery continued to falter in June, as building permits and housing starts unexpectedly declined.

Building permits fell 4.2 percent to a seasonally adjusted annual rate of 963,000, the Commerce Department said.

Housing starts fell 9.3 percent to an 893,000 unit pace.

In other trading, the euro advanced against the British pound after two consecutive days of decline, as the EURGBP climbed 0.21 percent to 0.7908. The pair faces initial support at 0.7880 and resistance at 0.7912.

The euro edged lower against the Japanese yen, as the EURJPY declined 0.12 percent to 137.33. The pair is likely to find support at 137.30 and resistance at 137.92.

The common currency advanced against the Canadian dollar. The EURCAD was trading at 1.4543, climbing 0.1 percent. Initial support is likely found at 1.4487 and resistance at 1.4590.

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