Forexpros – The euro fell against the U.S. dollar on Friday, paring some of the week’s gains as fears over the financial crisis in the single currency bloc ahead of next week’s key economic summit dampened risk appetite.
EUR/USD hit 1.3549 on Friday, the pair’s highest since November 22; the pair subsequently consolidated at 1.3391 by close of trade on Friday, gaining 0.51% over the week.
The pair is likely to find support at 1.3258, Wednesday’s low and resistance at 1.3568, the high of November 22.
The euro rose to an eight-day high against the greenback on Friday, after official data showed that the U.S. unemployment rate dropped unexpectedly to a two-and-a-half year low of 8.6% in November, as the U.S. economy created 120,000 new jobs.
The single currency was also supported by speculation that the European Central Bank may lend as much as EUR270 billion to the International Monetary Fund to support troubled euro zone economies.
But risk appetite weakened as investors remained uncertain whether the euro zone’s bailout fund, the European Financial Stability Facility, can contain the region’s debt crisis and amid speculation over a potential downgrade of Spain.
On Thursday, ECB President Mario Draghi indicated that the bank was ready to take stronger action to fight the region’s debt crisis if political leaders can agree on much tighter budget controls at Friday’s European Union summit.
The euro jumped 0.96% against the broadly lower dollar on Wednesday after six major central banks including the Federal Reserve and the ECB said they had agreed to lower dollar swap rates to prevent a lack of liquidity in the global financial system.
The announcement came after China said that it plans to cut bank’s reserve requirement ratios in an effort to help boost liquidity and support the world’s second largest economy amid global market turmoil.
Also Wednesday, official data showed that the rate of consumer price inflation in the single currency bloc remained unchanged at 3% for the third straight month in November.
A separate report showed that unemployment in the euro zone ticked up to 10.3% last month from 10.2% in September.
In the week ahead, investors will be closely watching the ECB’s policy meeting on Thursday, amid expectations for a 0.5% rate cut by the bank. Meanwhile, EU leaders are to hold a summit meeting to address the region’s crisis on Friday.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 5
The euro zone is to produce revised data on service sector growth, as well as data on investor confidence, an important indicator of economic health. In addition the single currency bloc is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
In the U.S., the Institute of Supply Management is to release a report on service sector activity, a leading indicator of economic health. The U.S. is also to publish government data on factory orders, a leading indicator of production.
Tuesday, December 6
The euro zone is to produce revised data on gross domestic product, while Germany is to publish official data on factory orders.
Wednesday, December 7
In the euro zone, Germany is to produce government data on industrial production, a leading indicator of economic health.
Later in the day, the U.S. is to release government data on crude oil stockpiles.
Thursday, December 8
The ECB is to announce its benchmark interest rate; the bank’s post-policy meeting press conference will be closely watched for any clues to the possible future direction of monetary policy.
Also Thursday, the U.S. is to publish its weekly report on initial jobless claims, the nation’s earliest economic data.
Friday, December 9
In the euro zone, France is to produce official data on industrial production, a leading indicator of economic health. Meanwhile, European Union leaders are to hold an economic summit in Brussels to outline plans to enforce stricter budget rules across the euro zone and prevent the region’s debt crisis from worsening.
The U.S. is to round up the week with data on the trade balance, while the University of Michigan is to release preliminary data on consumer sentiment and inflation expectations, leading indicators of economic health.
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