Forexpros – The euro fell against the dollar Thursday as fears that heavy debt burdens across the continent will be hard to manage after terms from a banking-sector capital increase spooked the market.
EUR/USD hit 1.2937 during early Asian trading, down 0.03%, up from a session low of 1.2930 and off from a high of 1.2947.
The pair was likely to test support at 1.2898, Wednesday’s low, and resistance at 1.3077, Tuesday’s high.
The European Central Bank continues to report that banks are stashing more and more money in overnight deposit accounts instead of lending it out, fueling fears that the credit crunch remains stuck in place, which bodes poorly for the economy.
Also in Europe, Italy’s UniCredit financial institution placed a EUR7.5 billion rights issue at a steep discount, reflecting concerns that other banks will have a tough time raising capital amid times of waning faith in the financial sector in general.
“UniCredit’s rights issue provides a weak read-across to the rest of the sector and will put additional pressure on those other banks needing to boost capital levels,” analysts at investment bank Macquarie write in a report, according to Reuters.
Meanwhile, eurozone inflation slowed to 2.8% in December from a three-year high in November.
While in line with expectations, slowing inflation rates often indicate slowing demand or softening economic activity in general.
French inflation rates came in a little slower than expected at -0.1%.
Meanwhile, the euro was down against the pound and down against the yen, with EUR/GBP inching down 0.02% to 0.8284 and EUR/JPY falling 0.09% at 99.20.
Later on Thursday, closely watched economic indicators will hit the wire out of the U.S.
The ADP National Employment Report will come out and act as a precursor to official unemployment rates due out Friday, while weekly jobless claims numbers will come out Thursday as well.
The U.S. will also release gasoline and crude inventories, which may shed some light on overall demand for energy used to fuel economic growth.
Canada will release its Ivey Purchasing Managers’ Index, while in Europe, the U.K. will unveil its Services Purchasing Managers’ Index while the eurozone countries will release their numbers on industrial new orders.
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