Forex - EUR/USD down sharply on global economic outlook

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Forexpros - The euro was down sharply against the broadly stronger U.S. dollar on Thursday, dropping to a three-day low as a flurry of weak U.S. data exacerbated fears over global economic growth prospects.

EUR/USD hit 1.4270 during U.S. morning trade, the lowest since August 15; the pair subsequently consolidated at 1.4290, retreating 0.92%.

The pair was likely to find support at 1.4149, the low of August 12 and resistance at 1.4516, Wednesday's high and a three-week high.

The Federal Reserve Bank of Philadelphia said earlier that its manufacturing index plunged by 33.9 points to minus 30.7 in August, the lowest level since March 2009. Analysts had expected the index to increase to 3.9 in August from 3.2 in July.

Separately, the U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits in the week ending August 12 rose by 9,000 to a seasonally adjusted 408,000, higher than the expected increase of 400,000.

The previous week's figure was revised up to 399,000 from 395,000.

Meanwhile, the National Association of Realtors said that existing home sales declined by 3.5% to a seasonally adjusted 4.67 million units in July, an eight-month low, confounding expectations for a gain of 2.7% to 4.90 million units.

A separate report showed that the U.S. core consumer price inflation rose 0.2% in July, in line with market expectations, while consumer prices including food and energy costs rose 0.5% last month, above expectations for a 0.2% increase.

The euro found brief support earlier, spiking to a daily high of 1.4451 before falling back after ratings agency Standard & Poor's affirmed France's AAA credit rating with a stable outlook, easing fears the euro zone's second largest economy would lose its top-tier rating.

Elsewhere, the euro was also down against the pound, with EUR/GBP shedding 0.34% to hit 0.8690.

Also Thursday, Wall Street investment bank Morgan Stanley cut its outlook for global economic growth for 2012, citing an "insufficient policy response to Europe's sovereign debt crisis, weakened confidence and the prospect of fiscal tightening".

The investment bank added that the U.S. and Europe are "dangerously close to recession."

The downbeat growth outlook prompted Morgan Stanley to forecast a rate cut by the European Central Bank in 2012, reversing previous expectations for a rate hike.

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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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