Forexpros – The euro extended losses against the U.S. dollar on Wednesday, to trade close to a 16-month low after a report showed that the euro zone’s economy grew less than initially expected in third quarter of 2011.
EUR/USD hit 1.2682 during European early afternoon trade, the pair’s lowest since January 9; the pair subsequently consolidated at 1.2704, shedding 0.57%.
The pair was likely to find support at 1.2662, the low of January 9 and a 16-month low and resistance at 1.2817, the high of January 10.
The weak data underscored fears over impact of the region’s financial crisis on the outlook for growth.
In a report, Eurostat said that the euro zone’s gross domestic product rose by a seasonally adjusted 0.1% in the third quarter, down from a preliminary estimate of 0.2% and slowing from growth of 0.8% in the preceding quarter.
Meanwhile, Spain and Italy were preparing to sell as much as EUR17 billion in debt on Thursday and Friday respectively.
The yield on 10-year Italian government bonds remained above the 7% threshold seen as unsustainable, at 7.14%, while the yield on Spanish 10-year bonds was at 5.54%.
Markets were also jittery ahead of Thursday’s European Central Bank policy meeting. The ECB was expected to keep rates unchanged at 1% and to reiterate that governments in the euro zone must step up efforts to tackle the region’s debt crisis.
Adding to concerns, a report showed that overnight deposits at the European Central Bank on Wednesday hit a fresh record of EUR485.898 billion, indicating that banks in the region remain unwilling to lend to each other.
Elsewhere, the euro was fractionally higher against the pound with EUR/GBP inching up 0.02%, to hit 0.8254.
Later in the day, the U.S. was to produce official data on crude oil stockpiles, while the Federal Reserve was to release its Beige Book.
Forexpros
