Investing.com - The euro firmed against the greenback on Monday after sluggish U.S. factory data sent investors ditching the dollar on sentiments that recovery still faces headwinds and will prompt the Federal Reserve to dismantle stimulus programs at a very gradual pace.
In U.S. trading, EUR/USD was trading at 1.3528, up 0.29%, up from a session low of 1.3478 and off a high of 1.3568.
The pair was likely to find support at 1.3478, the earlier low, and resistance at 1.3568, the earlier high.
The dollar softened after the Institute for Supply Management said its manufacturing index fell to a seven-month low in January, as new orders slumped.
The ISM’s manufacturing purchasing managers’ index came in at 51.3 in January, down from 57.0 in December.
Analysts were expecting the index to inch down to 56.4 in January.
The report added new order growth fell at its fastest rate in 33 years, with the new orders index dropping to 51.2 from 64.4 in December. The employment index fell from 55.8 in December to 52.3, the weakest since June.
Also on Monday, U.K.-based Markit reported that its U.S. manufacturing PMI came in at a three-month low of 53.7 for January, missing expectations for a 53.8 reading.
The soft numbers reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, and won't tighten policy anytime in the foreseeable future.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
Meanwhile across the Atlantic, Markit reported that the euro zone’s January manufacturing PMI rose to a 32-month high of 54.0 in January, up from 52.7 in December and higher than the preliminary estimate of 53.9.
However, the euro refused to surge against the greenback due to last week's soft inflation data that fueled fears the European Central Bank may avoid tightening policy to stave off the risk of deflation.
The euro area's flash consumer price index rose 0.7% on year in January, according Eurostat, missing market calls for a 0.9% reading, which softened the single currency.
Core inflation, stripped of volatile food, energy, alcohol and tobacco items, rose 0.8%, in line with expectations.
The euro was up against the pound, with EUR/GBP rising 1.10% to 0.8298, and down against the yen, with EUR/JPY trading down 0.67% at 136.83.
The yen continued to see safe-haven demand due to ongoing concerns that emerging markets will remain volatile due to a possible slowdown in China and less stimulus from the Federal Reserve sending funds trickling into non-U.S. stock markets.
On Tuesday in the euro zone, Spain is to release unemployment data, while the U.S. is to produce data on factory orders, a leading indicator of production.