Forexpros – The euro erased gains against the U.S. dollar on Thursday, falling to a seven-week low after comments by German Chancellor Angel Merkel fanned fears that European leaders will not be able to agree on a solution to the region’s debt crisis.
EUR/USD pulled back from 1.3411, the daily high, to hit 1.3326 during European afternoon trade, slipping 0.11%.
The pair was likely to find support at 1.3319, Wednesday’s low and a seven-week low and resistance at 1.3530, Wednesday’s high.
Speaking at a joint news conference with France’s Nicolas Sarkozy and Italy’s Mario Monti following a meeting earlier, Merkel reiterated her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline.
The comments came after ratings agency Fitch downgraded Portugal’s sovereign rating to junk status, saying it expects gross domestic product to contract by 3% in 2012, making the government’s deficit reduction plan far more challenging to execute.
The single currency found support during early trade after a report showed that German business confidence improved unexpectedly this month, indicating that the euro zone’s largest economy is coping with the debt crisis better than experts had feared.
Sentiment on the single currency had soured on Wednesday after the least successful German bond sale since the launch of the single currency sparked concerns over contagion to core euro zone economies.
The euro was slightly higher against the pound, with EUR/GBP rising 0.11% to hit 0.8603.
Meanwhile, trade looked likely to remain subdued with markets in the U.S. closed for the Thanksgiving holidays.
Forexpros
