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Forex - EUR/USD lower as doubts over summit agreement weigh

Published 07/02/2012, 07:27 AM
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Investing.com - The euro remained lower against the U.S dollar on Monday, as uncertainty over Friday’s European Union agreement on fresh measures to deal with the debt crisis in the euro zone and weak economic data weighed.

EUR/USD hit 1.2612 during European early afternoon trade, the session low; the pair subsequently consolidated at 1.2625, shedding 0.28%.

The pair was likely to find support at 1.2518, the low of June 22 and resistance at 1.2692, Friday’s high and a six-day high.

The euro rallied against the dollar on Friday after European leaders agreed to use the euro zone’s bailout funds to support struggling banks directly, without adding to national debt, and to purchase government debt in order to keep borrowing costs down.

Leaders also agreed to set up a joint banking supervisory body for the euro area.

But the single currency came under renewed selling pressure amid questions over the long-term effectiveness of the measures in addressing the root causes of the euro zone’s debt crisis and uncertainty over how and when the measures can be implemented.

Earlier Monday, Finland and the Netherland’s reiterated their opposition to using euro zone bailout funds to purchase government bonds.

Meanwhile, concerns over the outlook for the euro zone economy re-emerged after official data showed that the unemployment rate in the bloc rose to a record high 11.1% in May, up from 11.0% in April.

A separate report showed that the final reading of the euro zone manufacturing purchasing managers’ index came in at 45.1 in June, above the preliminary estimate of 44.8 and holding steady at its lowest level since June 2009.

Investors were also beginning to focus on Thursday’s European Central Bank policy meeting, amid growing expectations for a rate cut, as well as Friday’s U.S. nonfarm payrolls data.

The euro dipped against the pound, with EUR/GBP inching down 0.09% to 0.8054 and was lower against the yen, with EUR/JPY down 0.35% to trade at 100.68.

Later in the session, the Institute for Supply Management was to release a report on activity in the U.S. manufacturing sector.


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