Forex - EUR/USD solidly higher on weak U.S. data

Investing.com - The euro moved higher against the U.S. dollar Wednesday, as ongoing euro zone debt crisis fears  and disappointing U.S. economic data weighed on market sentiment.

EUR/USD hit 1.2599 in early afternoon U.S. trade, up 0.76%.

The pair was likely to find support at 1.2409, the low of June 6 and resistance at 1.2624, the high of June 7.

Depressing the greenback, The Commerce Department reported U.S. retail sales declined by a seasonally adjusted 0.2% in May, falling for the second successive month, marking the first back-to-back- decline in two years.

April’s figure was revised to a 0.2% decline from a previously reported gain of 0.1%.

Core retail sales, which exclude automobile sales, fell by 0.4% last month, the biggest decline since May 2010.

A separate report showed that U.S. producer price inflation fell 0.2% in May, the largest monthly decline since July 2009.

The weak data added to expectations that the Federal Reserve may implement a third round of easing to shore up economic growth after Chicago Fed President Charles Evans reiterated his support for additional monetary stimulus on Tuesday.

The euro remained under pressure amid worries that a bailout of as much as EUR100 billion for Spain’s banks will add to the country’s debt burden and make it more difficult for Madrid to access credit markets.

The yield on Spanish 10-year bonds ticked up to 6.76% earlier, close to the critical 7% level, which is viewed as unsustainable in the long run after it prompted bailouts in Greece, Ireland and Portugal.

Meanwhile investors were focused on the outcome of Sunday’s general election in Greece, which could determine if the country remains in the euro zone.

The euro was solidly higher against the pound and the yen, with EUR/GBP rising 0.82% to hit 0.8096 and EUR/JPY spiking 0.62% to hit 100.07.

Earlier Wednesday, Italy saw one-year borrowing costs surge to the highest level since December at an auction of government bonds, amid growing fears the country will be the next euro zone member to require a bailout.

Meanwhile, official data showed that industrial production in the euro zone fell 0.8% in April, down for the second consecutive month, underlining fears over the health of the region’s economy.