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Forex - EUR/USD gains on soft U.S. factory numbers, inflation data

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Investing.com - Softer-than-expected inflation figures and regional factory data out of the U.S. weakened the dollar on Thursday and gave the euro room to rise by convincing markets that the Federal Reserve's stimulus policies will stay in place for a while.

Monetary stimulus tools, such as low interest rates, dovish language and the Fed's monthly USD85 billion asset-purchasing program, weaken the dollar to spur recovery.

In U.S. trading on Thursday, EUR/USD was up 0.06% at 1.2895, up from a session low of 1.2847 and off from a high of 1.2930.

The pair was likely to find support at 1.2844, Wednesday's low, and resistance at 1.3029, Tuesday's high.

The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April.

Analysts were expecting the index to improve to a reading of 2.4 in May, which fueled sentiments that loose policies at the Federal Reserve aren't going to wind down anytime soon as did disappointing numbers out of the labor market.

The Department of Labor said earlier Thursday that the number of individuals filing for initial unemployment assistance in the U.S. rose by 32,000 to 360,000 last week, well above expectations for an increase of 2,000 to 330,000.

Soft inflation data took the steam out of the dollar as well.

The country's consumer price index fell 0.4% in April from March, worse than expectations for a 0.2% decline, down for the second consecutive month.

Year-on-year inflation rates in the U.S. came to 1.1%, just shy of market expectations for a 1.3% reading and well below the Federal Reserve's 2% target.

Spotty data out of the housing industry dampened the dollar as well.

The Commerce Department said the number of building permits issued in the U.S. rose 14.3% to 1.017 million units in April, well above expectations for a 6.2% increase to 945,000 units.

U.S. housing starts fell by 16.5% last month to 853,000 units, outpacing expectations for a decline of 4.9% to 973,000.

Thursday's data came in wake of soft industrial output and producer-price reports released on Wednesday.

Soft indicators out of Europe cushioned the dollar's losses by bolstering the greenback's use as a safe-haven due to its liquidity.

On Wednesday, official data revealed that the eurozone economy contracted by 0.2% in the three months to March, a little more than analysts' calls for a 0.1% contraction.

Earlier Thursday, the eurozone said its consumer price index rose 1.2% on year in April, in line with expectations.

A separate report revealed that the eurozone posted a record trade surplus in March as imports fell 1% from February, while exports grew 2.8%.

The euro, meanwhile, was down against the pound and down against the yen, with EUR/GBP trading down 0.38% at 0.8426, and EUR/JPY trading down 0.08% at 131.68.

On Friday, the U.S. will release preliminary data from the University of Michigan on consumer sentiment and inflation expectations.

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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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