Investing.com - The euro was slightly higher against the dollar on Tuesday as dovish comments by Federal Reserve Chairman Janet Yellen weighed on the dollar, but the euro’s gains were held in check after Monday’s weak euro zone inflation data.
EUR/USD touched session highs of 1.3802 and was last up 0.15% to 1.3790.
The pair was likely to find support at 1.3720, Monday’s low and resistance at 1.3825.
The dollar weakened after Ms. Yellen said Monday that “considerable slack” still remained in the U.S. labor market and reiterated that the Fed’s commitment to economic stimulus will still be needed for some time.
The euro remained supported as hopes that China will soon take steps to shore up slowing economic growth underpinned risk appetite.
But the common currency remained under pressure after data on Monday showed that the annual rate of inflation in the euro area rose 0.5% in March, the lowest since November 2009, and well below the European Central Bank’s target of just below 2%.
The euro initially fell against the dollar after the data, before recovering. The weak data added to pressure on the ECB to implement fresh policy measures to stave off the threat of deflation in the region.
The euro fell to one-month lows against the dollar last week after ECB officials highlighted growing concerns over the threat of deflation.
However some investors expect the ECB to leave monetary policy on hold at its upcoming meeting on Thursday, after Bundesbank head Jens Weidmann said over the weekend that the euro zone is not in a deflationary cycle, and that the slowdown in inflation was due in large part to temporary factors, such as falls in food and energy prices.
The euro was higher against the softer yen, with EUR/JPY rising 0.31% to 142.56.
The shared currency was also higher against the pound, with EUR/GBP up 0.35% to 0.8292.
Sterling slipped after data on Tuesday showed that the rate of the expansion in Britain’s factory sector slowed in March, but the recovery remained solid and continued to drive strong job creation in the sector.
Markit said its U.K. manufacturing purchasing managers’ index fell to an eight-month low of 55.3 last month from a downwardly revised 56.2 in February. Analysts had expected the manufacturing index to tick up to 56.7.