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EUR/USD flat, as investors digest dour outlook of weak economic growth

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Investing.com -- EUR/USD inched down fractionally on Tuesday, remaining near five-month highs, as foreign exchange traders reacted to broad indications on slowing economic growth and plunging government bond yields throughout the euro zone.

The currency pair traded in a tight range between 1.1357 and 1.1405, before settling at 1.1385, down 0.02% on the session. Following a five-day winning streak last week, EUR/USD remained flat for the second consecutive session. The euro still closed above 1.13 against the dollar for the fifth straight trading day. Since the Federal Reserve lowered its long-term interest rate forecast on March 16, the euro has soared more than 2.4% against its American counterpart.

EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.

Citing low inflation, weak growth opportunities, a lack of new jobs and high debt burdens, International Monetary Fund managing director Christine Lagarde said Tuesday that the global economic outlook has darkened over the last six months. While delivering an address at the Goethe Institute in Frankfurt, Lagarde also criticized top political leaders for not enacting stronger fiscal measures to help stave off a potential recession.

"There is always a good reason not to act. But that would be precisely the wrong move," Lagarde said in an interview with Bloomberg. "The growth momentum is weak, risks are probably on the rise, and confidence is sorely lacking."

Separately, the Federal Reserve Bank of Atlanta lowered its first quarter U.S. GDP growth estimate to 0.4%, from previous forecasts of 0.7% last week. In explaining the downward revision, the Atlanta Fed cited soft vehicle sales in a report issued on Monday by the U.S. Bureau of Economic Analysis, as well as declines in real consumer spending growth and real equipment investment growth.

Elsewhere, the German Economy ministry said on Tuesday that factory orders in February orders unexpectedly fell by 1.2% on the month, dropping to their lowest level in six months. Following a 0.5% increase in January, analysts expected consensus gains of 0.2%. It came as export orders slumped by 2.7%, while orders from the rest of the euro area declined by nearly 4% on the month. The downbeat data provided signals of weak economic growth throughout the euro zone.

As a result, the German Dax plummeted 2.6%, while the FTSE 100 in London fell to three-week lows, amid souring economic sentiment throughout Europe. Yields on the Germany 10-Year fell more than three basis points at session lows, dipping to their lowest level since April, 2015. Yields on German 10-year bunds have fallen more than 90% over the last two years. U.S. 10-Year Treasuries, meanwhile, lost four basis points to 1.72%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.15% to an intraday high of 94.99, before settling at 94.61. The index remains near five-month lows.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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