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Euro Pares Losses on Weak US Data

H.S. Borji
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Euro Pares Losses on Weak US Data

The euro narrowed its losses against the US dollar Friday, rebounding from a seventh-month low as US consumer confidence unexpectedly declined this month.

The EURUSD snapped a three-day losing streak, but is still on pace for a weekly loss of more than half a percent. The pair was trading at 1.3527, little changed from Thursday’s close. The pair faces initial support at 1.3514 and resistance at 1.3539, which is slightly above the 50-day exponential moving average.

The US dollar advanced this week on the heels of testimony from Federal Reserve Chair Janet Yellen, who said on Tuesday the central bank could be prepared to lift rates sooner than expected if the labour market continues to improve at a marked pace.

The US dollar lost some of its momentum Friday after a closely followed gauge of consumer sentiment unexpectedly declined. The University of Michigan’s gauge of consumer sentiment unexpectedly declined in July, hitting a four-month low. The index fell from 82.5 to 81.3. Economists forecast a rise to 83.

The Eurozone had no major economic figures to report today.

Germany’s finance minister and European Central Bank chief Jens Weidman said in a speech today that Eurozone governments must pass reforms to boost their economies rather than rely on the central bank for help.

Weidmann stressed ultra-loose monetary policy could undermine the Eurozone’s stability and that low interest rates have played their role in maintaining price stability.

“In the long term, the ultra-loose monetary policy poses risks to financial stability,” Weidmann said in a speech in Madrid, Spain. “Low interest rates also ease the pressure on governments to vigorously tackle their countries’ problems. There is a danger that the low interest rates will be used not to consolidate budgets, but to finance additional spending.”

The ECB slashed its overnight interest rate to 0.15 percent in June and introduced a negative deposit rate in an effort to shore up dangerously low consumer inflation.

Eurozone consumer prices advanced at an annual rate of 0.5 percent in June, unchanged from the previous month. Consumer inflation has trended at less than 1 percent since October of last year.

So-called core prices, which exclude volatile goods such as food and energy, advanced at an annual rate of 0.8 percent in June.

In other trading, the euro edged higher against the British pound, advancing 0.06 percent to 0.7914. The pair faces initial support at 0.7898 and resistance at 0.7922. The EURGBP has declined nearly 0.7 percent since Tuesday.

The euro advanced against the Japanese yen, as the EURJPY climbed 0.17 percent to 137.10. The pair faces initial support at 136.58 and resistance at 137.36.

Bank of Japan policymakers agree the country’s economic recovery is on track and that the slowdown in inflation is only temporary, the minutes of the June 12-3 policy meetings revealed Thursday. The minutes suggested the BOJ wouldn’t rush to expand its quantitative easing program, which according to some market analysts is necessary if the central bank hopes to achieve its inflation target.

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