Investing.com -- The euro rose modestly against the U.S. dollar on Tuesday snapping a three-session skid, as concerns related to the Greek debt crisis and the timing of an interest rate hike by the Federal Reserve remained in focus.
EUR/USD rose 0.0039 or 0.35% to 1.1186 in U.S. afternoon trading, after falling to a session-low of 1.1066 on a choppy session Tuesday. Earlier, the pair reached a daily-high of 1.221 in European afternoon trading. EUR/USD had been in a holding pattern between 1.05 and 1.10 since mid-March until the euro rallied significantly against the dollar early last week.
The pair likely gained support at 1.0858 the low from April 28 and met resistance at 1.1291 the high from May 1.
In Brussels, talks between Greece and its euro zone creditors were put on hold until Athens agreed to further reform measures deemed necessary to unlock critical aid, Pierre Moscovici, the European commissioner for Economic Affairs, told reporters on Tuesday. Still, Moscovici struck an optimistic tone in an interview with Euronews, describing the negotiations as amicable and holding out hope that a deal can be reached at the next euro group meeting on May 11.
The uncertainty surrounding Greece has sent yields on sovereign debt throughout Europe skyrocketing in recent days. On Tuesday, yields on 10-year Italian, 10-year Spanish and 10-year Portuguese all rose by more than 25 basis points on the session. Over the last week, yields on 10-year Italian bonds are up approximately 33%.
Elsewhere, the U.S. trade deficit in March soared to its highest level in more than six years, as a prolonged labor dispute at critical West Coast ports and the stronger dollar weighed heavily on foreign trade. In its monthly report, the U.S. Department of Commerce said the nation's trade deficit surged 43.1% to $51.4 billion, its highest level since Fall, 2008. The significant monthly percent increase was also the highest since December, 1996. When adjusted for inflation, the deficit rose $16 billion to $67.2 billion in March, up from $51.2 billion a month earlier.
March exports rose modestly to $187.8 billion, while imports skyrocketed by more than $17 billion to $239.2 billion for the month. Bolstered by cell phone and other household good imports, consumer goods increased by $9.0 billion in March. While the U.S. report a surplus in trade with Central America ($2.9 billion), OPEC ($0.7 billion) and Brazil ($0.4 billion), it was offset by deficits with China($37.8 billion), the European Union ($11.0 billion), Japan ($6.3 billion), Germany ($5.6 billion) and Mexico ($4.8 billion).
The widening of the trade deficit has led to rising concern of a contraction in the economy in the first quarter. Last week, the Commerce Department said GDP for the first quarter rose by 0.2%, in line with paltry estimates from the Federal Reserve of Atlanta. A surge in exports reflecting the stronger dollar served as the heaviest drag on GDP growth, the Commerce Department said. Following its April meeting last week, the Federal Open Market Committee reiterated that it will take a data-driven approach to the timing of its first interest rate hike since the end of the Financial Crisis.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell to 95.20 following the release, after rising to 96.10 earlier in the session. In U.S. afternoon trading, the index inched up to 95.26.
Currency traders await a general election on Thursday to elect the 56th Parliament of the United Kingdom. UK prime minister David Cameron has said that British voters face an "inescapable choice," of voting for him or facing chaos by selecting his opponent Ed Miliband. Cameron has promised a referendum to voters that could enable the UK to eventually leave the European Union.