Forexpros – The euro held steady against the U.S. dollar on Wednesday, opening slightly higher as traders shrugged off a threat from the Standard & Poor\’s ratings agency to downgrade a key emergency fund, while renewed faith that European leaders will navigate the continent out of the debt crisis also bolstered the unit.
Healthy German economic data buoyed the currency as well.
EUR/USD hit 1.3405 during early Asian trading, up 0.03% from yesterday’s close.
The pair sought to test support levels at 1.3334, Tuesday’s low, and resistance at 1.3550, Friday’s high.
On Monday, Standard & Poor’s threatened to downgrade 15 European nations on concerns of tightening credit conditions and a perceived political unwillingness to push through tough fiscal reforms to ease the debt crisis.
That threat grouped all six countries carrying the agency’s coveted AAA ratings, which would include Germany, France, the Netherlands, Austria, Finland and Luxembourg.
A day later on Tuesday, Standard & Poor’s returned and said it slapped on negative watch on the AAA-rated European Financial Stability Facility, which is designed to assist financially troubled nations.
Markets reacted somewhat indifferently to that move considering the threat came after Standard & Poor’s had said the countries that guarantee the fund were at already risk for downgrades themselves.
The Standard & Poor’s warnings came days ahead of a summit in Brussels where European finance ministers will gather to discuss ways to bring the entire currency area closer together under one fiscal roof.
Currently, euro zone countries operate with one currency and under one monetary authority, the European Central Bank, but run their individual tax and spending policies.
Optimism that the continent’s leadership will find a path out of the crisis via greater fiscal coordination kept the euro firm.
Furthermore, German factory orders were up 5.2% in October, far outpacing market expectations of 1% and well above September’s 4.6% decline, a welcome surprise for the euro, which firmed on that news.
Europe’s gross domestic product grew 0.2% during the third quarter, in line with expectations, according to Eurostat, the statistical office of the European Union.
Meanwhile, the euro was up against the pound and the yen, with EUR/GBP gaining 0.04% to hit 0.8596 and EUR/JPY rising 0.10% to hit 104.28.
France is due to release its trade balance data while Italy is set to unveil its latest monthly industrial output figures on Thursday, both of which were not expected to fuel major volatility in the currency markets.
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