Investing.com - The euro firmed against the dollar on Tuesday in wake of disappointing U.S. housing data, while an upbeat German sentiment report gave the single currency added support.
In U.S. trading, EUR/USD was up 0.59% at 1.2511, up from a session low of 1.2434 and off a high of 1.2569.
The pair was likely to find support at 1.2413, Monday's low, and resistance at 1.2600, the high from Nov. 19.
U.S. housing starts fell unexpectedly last month, official data showed on Tuesday.
The Census Bureau reported earlier that the number of housing starts fell to 1.028 million units from 1.045 million in the preceding month whose figure was revised up from 1.009 million.
Analysts had expected the number of housing starts to rise to 1.030 million last month.
Building permits took a similar turn for the worse.
The Census Bureau reported that the number of building permits issued in November fell to 1.035 million from 1.080 million in the preceding month .
Analysts were expecting the number of building permits issued to fall to 1.060 million last month.
While a broader analysis of the U.S. housing sector still points to recovery, setbacks such as Tuesday's reports softened the greenback, namely as investors jumped to the sidelines to await the Federal Reserve's statement on monetary policy and interest rates due out on Wednesday.
Meanwhile in Europe, the single currency saw support after data revealed German economic sentiment in December improved to its highest level since May, indicating that conditions are becoming more favorable.
The ZEW Centre for Economic Research said that its index of German economic sentiment jumped to 34.9 in December from 11.5 in November, beating consensus forecasts for a 20.8 reading.
The report came after survey data showed that euro zone private sector activity grew at a slightly faster rate in December, but the rate of expansion was still one of the weakest seen over the past year.
The euro area composite output purchasing managers’ index, which measures the combined output of both the manufacturing and service sectors, rose to a two month high of 51.7, off November’s 16-month low of 51.1 and better than market calls for a 51.3 reading.
Germany’s private sector expanded at the slowest rate in 18 months while French private sector activity remained in contraction territory, though the euro held firm.
Elsewhere, the euro was up against the pound, with EUR/GBP up 0.06% at 0.7958, and up against the yen, with EUR/JPY up 0.10% at 146.68.
On Wednesday, expect markets to move on the Federal Reserve's statement on monetary policy and interest rates.
Elsewhere, the U.S. is to release data on consumer inflation and the current account.
The euro zone is to produce revised data on consumer price inflation.