Forexpros – The euro rose against the U.S. dollar on Friday, paring some of the week’s losses as renewed hopes of progress in tackling the euro zone’s debt crisis supported the single currency after finance ministers agreed to strengthen the region’s bailout fund for indebted countries.
EUR/USD hit 1.3251 on Thursday, the pair’s lowest since March 26; the pair subsequently consolidated at 1.3342 by close of trade on Friday, rising 0.54% over the week.
The pair is likely to find support at 1.3251, the low of March 29 and resistance at 1.3384, the high of March 27.
Euro zone finance ministers agreed on Friday to boost the bloc’s bailout lending limit to EUR800 billion, in order to combat the threat of sovereign debt contagion to larger economies such as Italy and Spain.
The firewall is to be comprised of EUR500 billion from the European Stability Mechanism, which will come in to effect from July, another EUR200 billion already committed in loans to Greece, Ireland and Portugal and EUR100 billion in bilateral loans and European Union funds.
Sentiment was also lifted after Spain’s government announced EUR27 billion of cuts in the most austere budget in 30 years, amid concerns that the country may be the next to need a bailout.
In the U.S., data on Friday showed that consumer spending posted its biggest jump in seven months in February, while an index of consumer sentiment rose more-than-expected in March.
The Commerce Department reported that personal spending rose 0.8% in February, above expectations for a 0.6% gain, although incomes rose only 0.2%, a little less than expected.
The Thomson Reuters/University of Michigan’s consumer sentiment index for March rose to 76.2, the highest in over a year and above expectations for a reading of 75.1.
Also Friday, a preliminary report showed that consumer price inflation in the single currency bloc rose more-than-expected in March, ticking up 2.6% after a 2.7% increase the previous month.
Analysts had expected consumer price inflation to rise 2.5% in March.
The report came after official data showed that German retail sales fell 1.1% in February, disappointing expectations for a 1.3% rise.
The previous month’s figure was upwardly revised to a 1.2% decline from a 1.6% fall.
On Thursday, official data showed that the number of unemployed people in Germany fell more-than-expected in March, while the country’s jobless rate dropped to a record low of 6.7%, indicating that the region’s largest economy is shrugging off the effects of the debt crisis.
In the U.S., the Department of Labor said the number of individuals filing for initial jobless benefits in the U.S. fell by 5,000 to a seasonally adjusted 359,000 last week, disappointing expectations for a decline of 14,000 to 350,000.
Jobless claims have remained below 400,000, a level historically associated with an improving labor market, in 20 of the past 22 weeks.
A separate report showed that the U.S. economy grew by 0.3% during the final three months of 2011, unchanged from a preliminary estimate.
In the week ahead, investors will be focusing on Monday’s U.S. manufacturing data, as well as Friday’s report on non-farm payrolls.
In the euro zone, market participants will be looking ahead to Wednesday’s European Central Bank policy meeting, as well as data on retail sales and unemployment, amid concerns that the bloc is slipping into a recession.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, April 2
The euro zone is to produce an official report on the region’s unemployment rate, a leading indicator of economic strength.
Later in the day, the U.S. is to release a report by the Institute of Supply Management on manufacturing activity.
Tuesday, April 3
The U.S. is to produce official data on factory orders, a key indicator of production. Later Tuesday, the Federal Reserve is to release the minutes of its most recent policy meeting.
Wednesday, April 4
In the euro zone, official data is to be published on retail sales as well as on German factory orders, a leading gauge of production. The ECB is to announce its benchmark interest rate. The bank’s rate statement will be followed by a press conference to discuss monetary policy.
The U.S. is to produce industry data on non-farm employment change, as well as an ISM report on service sector activity and government data on crude oil stockpiles. Later in the day, U.S. Treasury Secretary Timothy Geithner is due to speak.
Thursday, April 5
In the euro zone, Germany is to publish official data on industrial production, a leading indicator of economic health.
Later Thursday, the U.S. is to publish government data on unemployment claims, a leading indicator of economic health.
Friday, April 6
Markets in the euro zone are to remain closed for national holidays.
The U.S. is to round up the week with government data on non-farm employment change, followed by data on the unemployment rate. The country is also to release a government report on average hourly earnings, a leading indicator of consumer inflation.
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