Forexpros – The euro extended gains against the U.S. dollar on Wednesday, as disappointing U.S. economic data fuelled speculation over the possibility of another round of easing from the U.S. central bank.
EUR/USD hit 1.2561 during European afternoon trade, the pair’s highest since Friday; the pair subsequently consolidated at 1.2538, up 0.28%.
The pair was likely to find support at 1.2409, the low of June 6 and resistance at 1.2624, the high of June 7.
The Commerce Department said U.S. retail sales fell by a seasonally adjusted 0.2% in May, falling for the second successive month and marking the first back-to-back- decline in two years.
April’s figure was revised to a 0.2% decline from a previously reported gain of 0.1%.
Core retail sales, which exclude automobile sales, fell by 0.4% last month, the biggest decline since May 2010.
A separate report showed that U.S. producer price inflation fell 0.2% in May, the largest monthly decline since July 2009.
The weak data added to expectations that the Federal Reserve may implement a third round of easing to shore up economic growth after Chicago Fed President Charles Evans reiterated his support for additional monetary stimulus on Tuesday.
But the euro’s gains were limited amid worries that a bailout of as much as EUR100 billion for Spain’s banks will add to the country’s debt burden and make it more difficult for Madrid to access credit markets.
The yield on Spanish 10-year bonds ticked up to 6.76% earlier, close to the critical 7% level, which is viewed as unsustainable in the long run after it prompted bailouts in Greece, Ireland and Portugal.
Investors were also jittery ahead of Sunday’s general election in Greece, which could determine the country’s future in the euro zone.
The euro was higher against the pound and the yen, with EUR/GBP rising 0.44% to hit 0.8065 and EUR/JPY gaining 0.25% to hit 99.66.
Earlier Wednesday, Italy saw one-year borrowing costs surge to the highest level since December at an auction of government bonds, amid growing fears the country will be the next euro zone member to require a bailout.
Meanwhile, official data showed that industrial production in the euro zone fell 0.8% in April, down for the second consecutive month, underlining fears over the health of the region’s economy.
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