Forexpros – The euro pared gains against the U.S. dollar on Thursday, easing off the daily high amid escalating fears over the euro zone’s ongoing sovereign debt crisis and as worries grew over the health of the region’s banking sector.

EUR/USD retreated from 1.4274, the dally high, to hit 1.4192 during European afternoon trade, still up 0.09% on the day.

The pair was likely to find support at 1.4054, the low of August 5 and a two-week low and resistance at 1.4425, the high of August 8.

European equities were significantly off their earlier highs, as fears over the region’s ongoing sovereign debt crisis continued to weigh on sentiment.  

Shares in major French lenders erased gains from earlier in the session, to trade sharply lower. Societe Generale, which at one point saw shares trade 5.5% higher, tumbled 4.5%.

Rivals BNP Paribas saw shares drop 5.1%, amid speculation the lender was facing another EUR496 million of losses on Greece.
 
The reversal in French banks also weighed on peripheral lenders. Italian banking giant Unicredit sank 3.5%, Intesa Sanpaolo declined 1.1%, while Spanish banks Banco Santander and BBVA slumped 1% and 0.5% respectively.

Earlier in the day, Italian opposition leader Pierluigi Bersani rejected proposals for a blanket constitutional rule forbidding budget deficits but said his party was ready to support rules for greater budget discipline.

Last week, Italian Prime Minister Silvio Berlusconi said that the country will accelerate austerity measures and introduce a balanced budget rule to bring down the country’s debt by 2013.  

Elsewhere, the euro was lower against the pound, with EUR/GBP dipping 0.06% to hit 0.8782.

Later in the day, the U.S. was to release official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.

Forexpros
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