Investing.com - Lackluster inflation rates out of Germany weakened the euro against the dollar on Tuesday, as investors braced for the possibility that the European Central Bank will loosen policy to stave off broader deflationary pressures.
In U.S. trading, EUR/USD was down 0.30% at 1.3809, up from a session low of 1.3805 and off a high of 1.3879.
The pair was likely to find support at 1.3792, last Thursday's low, and resistance at 1.3880, Monday's high.
Germany’s Federal Statistics Bureau reported that the country's consumer price index fell 0.2% in April from March and rose 1.3% on year.
Markets were calling for a monthly decline of 0.1% and an annual increase of 1.4%, which kept the euro near session lows in early afternoon trading.
The data came as investors were looking ahead to preliminary data on euro zone inflation due for release on Wednesday, and Germany's numbers wiped out previous expectations for an uptick in consumer prices.
Euro zone inflation concerns eclipsed a soft report on consumer confidence out of the U.S., which investors shrugged off as lackluster as opposed to disappointing.
The Conference Board, a market research group, said its consumer confidence index declined to 82.3 in April from a 83.9 in March, whose figure was revised up from a previously reported 82.3.
Analysts had expected the index to inch down to 83.0 in April.
The Present Situation Index decreased to 78.3 from 82.5, while the Expectations Index was virtually unchanged at 84.9 versus 84.8 in March.
“Consumer confidence declined slightly in April, as consumers assessed current business and labor market conditions less favorably than in March,” Lynn Franco, Director of Economic Indicators at The Conference Board, said in a statement.
“However, their expectations regarding the short-term outlook for the economy and labor market held steady. Thus, while sentiment regarding current conditions may have slipped a bit, consumers do not foresee the economy, or the labor market, losing the momentum that has been building up over the past several months.”
The euro was down against the pound, with EUR/GBP down 0.41% to 0.8206, and down against the yen, with EUR/JPY down 0.21% at 141.64.
On Wednesday, Germany is to publish reports on retail sales and unemployment change. Spain is to release preliminary data on first quarter growth. The wider euro zone is to release preliminary data on consumer price inflation.
The U.S. is to release preliminary data on first quarter GDP, as well as the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on manufacturing activity in the Chicago region.
Later Wednesday, the Federal Reserve is to announce its federal funds rate and publish its statement on monetary policy.