Forexpros – The euro remained lower against the U.S. dollar on Monday, but expectations that the European Central Bank will soon take steps to contain the euro zone debt crisis supported the single currency.
EUR/USD hit 1.2255 during European afternoon trade, the session low; the pair subsequently consolidated at 1.2267, shedding 0.44%.
The pair was likely to find near-term support at 1.2240, Friday’s low and resistance at 1.2389, Friday’s high and a three-week high.
Italy saw the yield on 10-year bonds fall below 6% for the first time since April at an auction of government debt earlier, indicating that investors now see Italian government debt as a somewhat safer investment.
Italian and Spanish borrowing costs have eased back from highs hit last week after ECB President Mario Draghi pledged Thursday to do whatever is necessary to preserve the single currency.
The remarks fuelled speculation that the ECB is set to announce fresh policy measures to tackle the long running crisis in the region following its policy meeting on Thursday, but investors remained wary amid concerns that the central bank could disappoint market expectations.
Sentiment on the euro was also hit after official data showed that Spain’s economy contracted 0.4% in the three month to June, marking the third consecutive quarter of contraction.
A separate report showed that the European Commission’s index of economic sentiment across the euro area dropped to a 34 month low in July, with confidence in Spain, Germany and France all dropping sharply.
Meanwhile, investors were looking ahead to the outcome of the Federal Reserve’s policy setting meeting on Wednesday, amid speculation over whether the bank will hint at further easing measures.
The euro slipped lower against the pound, with EUR/GBP down 0.13% to 0.7811 and weakened against the yen, with EUR/JPY falling 0.71% to 95.95.
Later Monday, U.S. Treasury Secretary Timothy Geithner was to meet with German Finance Minister Wolfgang Schaeuble and Mario Draghi to discuss the European, U.S. and global economies.
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