Investing.com - The euro declined against the U.S. dollar on Friday, trimming weekly gains as traders continued to focus on talks in Washington to avert the fiscal cliff of spending cuts and tax hikes ahead of the year-end deadline.
EUR/USD hit 1.3157 on Friday, the pair’s lowest since December 18; the pair subsequently consolidated at 1.3161 by close of trade, up 0.18% for the week.
The pair is likely to find support at 1.3143, the low of December 17 and resistance at 1.3294, Thursday’s high.
Market sentiment remained under pressure as investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called “Plan B” fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.
The U.S. House has adjourned for the Christmas holiday, fueling speculation that policymakers will not be able to avert the fiscal cliff. Without a deal, the U.S. could fall back into recession and drag much of the world down with it.
Adding to the negative trade environment, Italian Prime Minister Mario Monti tendered his resignation after only 13 months in office, paving the way for a highly uncertain national election in February.
On the data front, the University of Michigan's consumer sentiment index slumped unexpectedly to a five-month low in December, possibly due to fears the U.S. will careen over the fiscal cliff.
The index dipped to 72.9 for December from 74.5 the previous month, missing analysts' call for an improvement to 74.7 this month.
Meanwhile, in Europe, the Gfk research group reported that its index of Germany’s consumer climate fell to 5.6 in December from 5.8 in November. Analysts had expected the index to improve to 5.9 this month.
The single currency climbed to the highest level since May against the U.S. dollar on Wednesday, as hopes for a deal to avoid the U.S. fiscal cliff and improved German business confidence data boosted demand for the euro.
In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 24
Markets in Germany will remain closed for Christmas Eve, while U.S. equity markets will close early at 13:30EST (18:30 GMT).
Tuesday, December 25
Markets in the U.S. and Europe will remain closed in observance of the Christmas Day holiday.
Wednesday, December 26
Markets in Europe will remain closed for the Boxing Day holiday.
Meanwhile, the U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on manufacturing activity in Richmond.
Thursday, December 27
The U.S. is to publish its weekly government report on initial jobless claims, as well as data on new home sales and consumer confidence.
Friday, December 28
In the euro zone, France is to release official data on consumer spending, while Italy is to hold an auction of ten-year government debt.
The U.S. is to round up the week with data on pending home sales, as well as a report on business conditions in the Chicago area, a leading indicator of economic health. The country is also to release official data on crude oil stockpiles and natural gas inventories.
EUR/USD hit 1.3157 on Friday, the pair’s lowest since December 18; the pair subsequently consolidated at 1.3161 by close of trade, up 0.18% for the week.
The pair is likely to find support at 1.3143, the low of December 17 and resistance at 1.3294, Thursday’s high.
Market sentiment remained under pressure as investors continued to monitor developments surrounding the fiscal cliff in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.
Doubts over whether a deal will be reached ahead of the year-end intensified late Thursday after House Speaker John Boehner pulled his so-called “Plan B” fiscal cliff option, which called for tax increases only on Americans earning USD1 million or more per year, because his Republican colleagues did not support the legislation.
The U.S. House has adjourned for the Christmas holiday, fueling speculation that policymakers will not be able to avert the fiscal cliff. Without a deal, the U.S. could fall back into recession and drag much of the world down with it.
Adding to the negative trade environment, Italian Prime Minister Mario Monti tendered his resignation after only 13 months in office, paving the way for a highly uncertain national election in February.
On the data front, the University of Michigan's consumer sentiment index slumped unexpectedly to a five-month low in December, possibly due to fears the U.S. will careen over the fiscal cliff.
The index dipped to 72.9 for December from 74.5 the previous month, missing analysts' call for an improvement to 74.7 this month.
Meanwhile, in Europe, the Gfk research group reported that its index of Germany’s consumer climate fell to 5.6 in December from 5.8 in November. Analysts had expected the index to improve to 5.9 this month.
The single currency climbed to the highest level since May against the U.S. dollar on Wednesday, as hopes for a deal to avoid the U.S. fiscal cliff and improved German business confidence data boosted demand for the euro.
In the week ahead trading volumes are expected to remain light because many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility.
Meanwhile, the U.S. is to release key reports on consumer confidence, jobless claims and home sales.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 24
Markets in Germany will remain closed for Christmas Eve, while U.S. equity markets will close early at 13:30EST (18:30 GMT).
Tuesday, December 25
Markets in the U.S. and Europe will remain closed in observance of the Christmas Day holiday.
Wednesday, December 26
Markets in Europe will remain closed for the Boxing Day holiday.
Meanwhile, the U.S. is to publish industry data on house price inflation, a leading indicator of demand in the housing market. The U.S. is also to release data on manufacturing activity in Richmond.
Thursday, December 27
The U.S. is to publish its weekly government report on initial jobless claims, as well as data on new home sales and consumer confidence.
Friday, December 28
In the euro zone, France is to release official data on consumer spending, while Italy is to hold an auction of ten-year government debt.
The U.S. is to round up the week with data on pending home sales, as well as a report on business conditions in the Chicago area, a leading indicator of economic health. The country is also to release official data on crude oil stockpiles and natural gas inventories.