Investing.com - The euro dropped to two-year lows against the dollar on Tuesday after euro area inflation data missed expectations, which eclipsed a soft consumer confidence report in the U.S.
In U.S. trading, EUR/USD was down 0.50% at 1.2622, up from a session low of 1.2571 and off a high of 1.2702.
The pair was likely to find support at 1.2500, the low from Sept. 5, 2012, and resistance at 1.2716, Monday's high.
Eurostat, the statistics arm of the European Union, reported earlier that the euro area's annual inflation rate fell to a five-year low of 0.3% in September from 0.4% in August.
Core inflation, which strips out food, energy, alcohol and tobacco costs, came in at 0.7%, down from 0.9% in August.
Slumping consumer prices fueled market expectations for the European Central Bank to implement fresh stimulus measures to stave off the threat of deflation in the region after the bank unexpectedly cut rates to record lows last month.
A separate report showed that the euro zone’s unemployment rate was unchanged at 11.5% in August.
Meanwhile in the United States, the Conference Board reported earlier that its consumer confidence index fell to 86.0 this month from 93.4 in August, whose figure was revised up from a previously reported 92.4.
Analysts expected the index to decline to 92.5 in September, though Europe's soft inflation data served as the pair's chief steering current.
A separate report showed that a Chicago-area purchasing managers' index fell to 60.5 this month from 64.3 in August. Analysts had expected the index to decline to 61.9 in September.
The dollar still enjoyed support due to expectations that the Fed is moving closer to hiking interest rates, as despite hiccups here and there, longer-term analysis of U.S. indicators points to an economy that is gaining steam.
Elsewhere, the euro was down against the pound, with EUR/GBP down 0.40% at 0.7780, and down against the yen, with EUR/JPY down 0.32% at 138.46.
On Wednesday, the U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Later in the session, the Institute of Supply Management is to release a report on manufacturing activity.