Forexpros – The euro tumbled against the U.S. dollar on Thursday, as fears over weakness in the European banking sector and mixed results at an auction of French government debt soured sentiment on the single currency.
EUR/USD hit 1.2826 during European early afternoon trade, the pair’s lowest since September 13, 2010; the pair subsequently consolidated at 1.2835, falling 0.81%.
The pair was likely to find support at 1.2700 and resistance at 1.2946, the session high.
Concerns over the health of the euro zone banking sector intensified after a report on Wednesday showed that that overnight deposits at the European Central Bank reached an all-time high this week, indicating that European banks remain unwilling to lend to each other.
Meanwhile, France sold EUR4.02 billion of 10-year bonds at an average yield of 3.29%, compared with 3.18% at a similar auction last month. Bids exceeded the amount sold 1.6 times, down from a bid-to-cover ratio of 3.1 in December.
France is seen as vulnerable to losing its triple-A credit rating in the coming weeks, after it was put on negative watch by ratings agencies Standard & Poor’s and Fitch’s in December, amid concerns over the handling of the financial crisis in the euro zone.
Also Thursday, official data showed that German retail sales dropped unexpectedly in November, declining for the second consecutive month.
A separate report showed that euro zone industrial new orders rose less-than-expected in October, while September’s figure was revised down sharply.
The euro was also sharply lower against the pound and the yen, with EUR/GBP slipping 0.19% to trade close to a 16-month low at 0.8270 and EUR/JPY falling 0.65% to hit 98.63, the lowest level since December 2000.
Later in the day, the U.S. was to release the ADP report on private sector employment as well as data on initial jobless claims and service sector activity.
Forexpros
