Investing.com - The euro extended Monday's gains against the dollar on Tuesday after investors continue to view the single currency as oversold versus the dollar despite lackluster consumer price inflation data out of Germany.
In U.S. trading on Tuesday, EUR/USD was up 0.20% at 1.3433, up from a session low of 1.3359 and off from a high of 1.3456.
The pair was likely to find support at 1.3298, Thursday's low, and resistance at 1.3548, Wednesday's high.
Data released on Tuesday showed that Germany's annual consumer price index slowed to 1.2% in October, in line with expectations though still at its lowest level in more than three years and also down from 1.4% in September.
The data added to concerns over growing deflationary pressures in the euro area, after the annual rate of inflation across the euro zone slowed to a four year low of 0.7% in October.
The downward trend in euro area inflation prompted the European Central Bank to cut rates to a record low 0.25% on Thursday, sparking a broad selloff in the euro, though bottom fishers brought the currency back up in Tuesday trading.
Meanwhile the dollar continued to see some support amid ongoing expectations for the Federal Reserve to begin scaling back its USD85 billion in monthly bond purchases either in December or in early 2014.
Stimulus tools such as monthly bond purchases aim to spur recovery by driving down long-term interest rates, weakening the dollar in the process.
Last week, the Bureau of Labor Statistics reported that the U.S. economy added 204,000 jobs in October, far surpassing expectations for a 125,000 increase.
Official data also revealed that the U.S. economy grew 2.8% on year in the third quarter, well beyond expectations for 2.0% growth.
Uncertainty over the timing of a Federal Reserve announcement to begin tapering the pace of its monthly bond purchases softened the greenback against a firming euro on Tuesday, as many expect the U.S. central bank to remain in standby mode until Janet Yellen takes the helm and holds her first policy meeting in March.
Elsewhere, the single currency was up against the pound and up against the yen, with EUR/GBP trading up 0.66% at 0.8441 and EUR/JPY trading up 0.62% at 133.78.
The pound softened after the Office for National Statistics said the U.K.'s annual inflation rate slowed to 2.2% in October, its lowest rise since September 2012, from 2.7% the previous month.
Economists were expecting a 2.5% year-on-year inflation rate for October.
The weak data prompted investors to rethink expectations that the Bank of England might hike interest rates sooner than the bank’s forward guidance from August indicated.
Inflation was 0.1% higher from a month earlier in October, below expectations for a 0.3% rise.
The U.K.'s core inflation rate, which is stripped of volatile energy, food, alcohol and tobacco items, slowed to 1.7% year-on-year, the lowest increase since September 2009 and well below September's 2.2% rate and expectations for a 2.0% rate.
The retail price index rose 2.6% in October, below forecasts for a 3.0% increase after rising 3.2% in September.
The data also revealed that the house prices index climbed 3.8% last month, missing consensus forecasts for a 4.1% gain.
On Wednesday, the euro zone is to publish data on industrial production.
In U.S. trading on Tuesday, EUR/USD was up 0.20% at 1.3433, up from a session low of 1.3359 and off from a high of 1.3456.
The pair was likely to find support at 1.3298, Thursday's low, and resistance at 1.3548, Wednesday's high.
Data released on Tuesday showed that Germany's annual consumer price index slowed to 1.2% in October, in line with expectations though still at its lowest level in more than three years and also down from 1.4% in September.
The data added to concerns over growing deflationary pressures in the euro area, after the annual rate of inflation across the euro zone slowed to a four year low of 0.7% in October.
The downward trend in euro area inflation prompted the European Central Bank to cut rates to a record low 0.25% on Thursday, sparking a broad selloff in the euro, though bottom fishers brought the currency back up in Tuesday trading.
Meanwhile the dollar continued to see some support amid ongoing expectations for the Federal Reserve to begin scaling back its USD85 billion in monthly bond purchases either in December or in early 2014.
Stimulus tools such as monthly bond purchases aim to spur recovery by driving down long-term interest rates, weakening the dollar in the process.
Last week, the Bureau of Labor Statistics reported that the U.S. economy added 204,000 jobs in October, far surpassing expectations for a 125,000 increase.
Official data also revealed that the U.S. economy grew 2.8% on year in the third quarter, well beyond expectations for 2.0% growth.
Uncertainty over the timing of a Federal Reserve announcement to begin tapering the pace of its monthly bond purchases softened the greenback against a firming euro on Tuesday, as many expect the U.S. central bank to remain in standby mode until Janet Yellen takes the helm and holds her first policy meeting in March.
Elsewhere, the single currency was up against the pound and up against the yen, with EUR/GBP trading up 0.66% at 0.8441 and EUR/JPY trading up 0.62% at 133.78.
The pound softened after the Office for National Statistics said the U.K.'s annual inflation rate slowed to 2.2% in October, its lowest rise since September 2012, from 2.7% the previous month.
Economists were expecting a 2.5% year-on-year inflation rate for October.
The weak data prompted investors to rethink expectations that the Bank of England might hike interest rates sooner than the bank’s forward guidance from August indicated.
Inflation was 0.1% higher from a month earlier in October, below expectations for a 0.3% rise.
The U.K.'s core inflation rate, which is stripped of volatile energy, food, alcohol and tobacco items, slowed to 1.7% year-on-year, the lowest increase since September 2009 and well below September's 2.2% rate and expectations for a 2.0% rate.
The retail price index rose 2.6% in October, below forecasts for a 3.0% increase after rising 3.2% in September.
The data also revealed that the house prices index climbed 3.8% last month, missing consensus forecasts for a 4.1% gain.
On Wednesday, the euro zone is to publish data on industrial production.