Forexpros – The euro pared losses against the U.S. dollar on Monday, after the release of weaker-than-expected data on U.S. personal spending and manufacturing activity added to concerns that the U.S. economic recovery is losing momentum.
EUR/USD pulled back from 1.3209, the session low, to hit 1.3237 during U.S. morning trade, still down 0.12% on the day.
The pair was likely to find support at 1.3156, Friday’s low and resistance at 1.3266, the session high.
Data in the U.S. showed that manufacturing activity in the Chicago area slowed significantly more-than-expected in April, while a separate report showed that consumer spending slowed last month.
The Chicago purchasing managers’ index fell by 6.0 points to a seasonally adjusted 56.2 in April from a reading of 62.2 in March. That was the lowest reading since November 2009. Analysts had expected the index to decline by 1.2 points to 61.0 in April.
The Bureau of Economic Analysis said consumer spending rose by 0.3% in March, slowing from 0.9% the previous month, while incomes rose a better-than-expected 0.4%.
The disappointing data fuelled speculation over the possibility of more monetary easing from the Federal Reserve, after official data on Friday showed that the U.S. economy grew at a slower than expected rate in the first quarter.
But the euro remained on the back foot after official data confirmed that Spain’s economy entered a recession in the first quarter, with gross domestic product contracting by 0.3% in the three months to March and 0.4% year-on-year.
Market reaction remained muted as the figures were slightly better than estimates released by the Bank of Spain last week for a 0.4% contraction in the first quarter and a 0.5% contraction on the year.
In addition, ratings agency Standard & Poor’s announced widespread credit ratings downgrades on Spain’s troubled banking sector, following a two notch downgrade of the country’s sovereign credit rating last week.
The euro was trading close to a 22-month low against the pound, with EUR/GBP dipping 0.06% to hit 0.8144 and slumped to a two-week low against the yen, with EUR/JPY down 0.60% to hit 105.74.
Also Monday, official data showed that consumer price inflation in the euro zone remained unchanged at 2.6% in April, but was higher than forecasts for a reading of 2.5%, dampening expectations for a rate cut by the European Central Bank.
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