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Forex - EUR/USD rebounds after weak U.S. consumer spending data

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Forexpros - The euro erased losses against the U.S. dollar on Tuesday, rebounding from an eight-day low, after official data showed that U.S. consumer spending declined unexpectedly in June, falling for the first time in almost two years.

EUR/USD pulled back from 1.4150, the pair's lowest since July 21, to hit 1.4269 during early U.S. trade, up 0.13% over the day.

The pair was likely to find support at 1.4067, the low of July 19 and resistance at 1.4368, the high of July 8.

The Commerce Department said consumer spending dipped 0.2% in June, the first drop since September 2009, after inching up 0.1% the previous month. Analysts had expected spending, which accounts for about 70% of U.S. economic activity, to rise 0.2% in June.

Disposable income edged up 0.1%, the smallest increase since November.

The personal consumption expenditures price index fell 0.2% after rising 0.2% in May. Year-on-year, the index was up 2.6% after increasing 2.6% in May.

But the core PCE index, which excludes volatile food and energy costs, rose 0.1% after gaining 0.2% the prior month.

The euro weakened broadly earlier after the yield on Spanish and Italian government bonds soared to euro lifetime highs, well above 6%, amid fears that a slowdown in global growth could impinge on government efforts to restore financial order in those countries.

A decision by Spanish Prime Minister Jose Luis Rodriquez Zapatero last week to call early elections for November also added to pressure on bond markets.

The euro was also higher against the pound, with EUR/GBP rising 0.20% to hit 0.8763.

Later Tuesday, the U.S. Senate was due to hold a final vote on a measure to raise the U.S. debt ceiling by at least USD2.1 trillion and cut federal spending by as much as USD2.4 trillion.

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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.

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