Forexpros – The euro tumbled to a two-year low against the U.S. dollar on Friday, as disappointing U.S. employment data and sustained concerns over the worsening of the debt crisis in the euro zone prompted investors to flock to safer assets.
EUR/USD hit 1.2259 on Friday, a two-year low; the pair subsequently consolidated at 1.2285 by close of trade on Friday, tumbling 3.08% over the week.
The pair is likely to find support at 1.2259, last Friday’s low and resistance at 1.2427, the low of May 31.
The euro fell below 1.23 against the dollar on Friday, after the U.S. Bureau of Labor Statistics said the economy added 80,000 jobs in June, below market forecasts for a gain of around 90,000.
April figures were revised to 68,000 from 77,000 jobs, while May’s numbers were revised to 77,000 from 69,000.
Although the data was weaker than expected, many investors said it was not bad enough to spur the Federal Reserve to launch a third round of quantitative easing, sending the greenback broadly higher.
The report also showed that the U.S. unemployment rate held steady at 8.2% in June, in line with expectations.
Market sentiment also weakened after International Monetary Fund Director Christine Lagarde said that the IMF will reduce its estimate for global growth this year on weakness in investment, jobs and manufacturing in Europe, the U.S., Brazil, India and China.
Meanwhile, the single currency remained under pressure after European Central Bank President Mario Draghi said on Thursday that the economic outlook faces downside risks, adding that indicators for the second quarter point to weakening growth in the euro zone.
Draghi said that there was probably a “renewed weakness in economic growth” in the last three months, with “heightened uncertainty”. He refused to speculate, however, on the chances of a third round of Long Term Refinancing Operations, which provides cheap loans to European banks to encourage them to lend.
The comments came after the central bank cut its benchmark interest rate to a record low 0.75% in July, in a bid to bolster faltering growth in the region.
Additional stimulus measures by the Bank of England and the People’s Bank of China also led to concerns over the outlook for global economic growth.
BoE policymakers voted to increase the stock of asset purchases financed by the issuance of central bank reserves by GBP50 billion to GBP375 billion, in order to shield the recession hit U.K. economy from the ongoing debt crisis in the euro zone.
China surprised traders by cutting interest rates for the second time in less than a month on Thursday, signaling that growth is slowing more than Beijing expected.
In the week ahead, investors will be closely watching ECB President Draghi’s testimony before the European Parliament, on Monday, as well as a two-day meeting of euro zone finance ministers, amid expectations for a final agreement on aid for Spanish banks.
Markets will also be eyeing the minutes of the Fed’s latest policy meeting as well as U.S. data on trade balance and unemployment claims.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 9
In the euro zone, a report by Sentix research group is to be produced on investor confidence, a key indicator of economic health. ECB President Draghi is also due to testify before the European Parliament, in Brussels.
Euro zone finance ministers are to meet in Brussels for a first day of talks.
Tuesday, July 10
France is to produce official data on industrial production.
Meanwhile, euro zone finance ministers are to hold a second day of talks in Brussels.
Wednesday, July 11
Germany is to hold a 10-year government bond auction.
Later Wednesday, the U.S. is to release official data on trade balance and crude oil stockpiles, followed by the minutes of the Federal Reserve’s most recent policy-setting meeting. The minutes will be closely watched for signs of future monetary policy decisions by the central bank.
Thursday, July 12
In the euro zone, official data is to be produced on industrial production, while the ECB is to release its monthly bulletin, which reveals the statistical data that the central bank’s Governing Board evaluated when making the latest interest rate decision. ECB President Draghi is also scheduled to speak later in the day.
Also Thursday, the U.S. is to publish government data on unemployment claims and official data on import prices, followed by the monthly Treasury statement.
Friday, July 13
The U.S. is to round up the week with government data on producer price inflation and a preliminary report by the University of Michigan on consumer sentiment.
Forexpros
