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Forex - EUR/USD hits fresh 2-year lows as inflation data disappoints

Published 09/30/2014, 05:09 AM
Updated 09/30/2014, 05:09 AM
Euro drops vs. dollar as deflation threat weighs

Euro drops vs. dollar as deflation threat weighs

Investing.com - The euro hit fresh two-year lows against the U.S. dollar on Tuesday, as the release of disappointing euro zone consumer price inflation data fuelled further concerns over the threat of deflation in the region, while demand for the greenback remained broadly supported.

EUR/USD hit 1.2622 during European morning trade, the pair's lowest since September 2012; the pair subsequently consolidated at 1.2619, retreating 0.52%.

The pair was likely to find support at 1.2500 and resistance at 1.2716, Monday's high.

In a preliminary report, Eurostat said that consumer price inflation in the euro zone rose at an annualized rate of 0.3% this month, in line with expectations, slowing from 0.4% in August.

The rate has now been below 1% for 12 straight months, well under the European Central Bank's target of near but just under 2%.

Core CPI, which excludes food, energy, alcohol, and tobacco costs rose by a seasonally adjusted 0.7% in September, following a 0.9% increase in August.

A separate report showed that the euro zone's unemployment rate remained unchaned at 11.5% in August.

Earlier Tuesday, official data showed that German retail sales rose 2.5% in August, exceeding expectations for a 0.5% gain, after a revised 1.1% decline the previous month.

Data also showed that the number of unemployed people in Germany rose by 13,000 last month, compared to expectations for a 2,000 decline. Germany's unemployment change for July was revised to a 3,000 increase from a previously estimated 1,000 rise.

Germany's unemployment rate remained unchanged at 6.7% last month, in line with estimates.

Meanwhile, the dollar remained broadly supported by the view that the strengthening economic recovery in the U.S. would prompt the Federal Reserve to hike rates sooner.

The euro was also lower against the pound, with EUR/GBP sliding 0.32% to 0.7786.

In the U.K., the Office for National Statistics said that the U.K. gross domestic product increased by 0.9% in the second quarter, beating expectations for 0.8% growth and up from a previous estimate of 0.7%.

Year-on-year, the U.K. economy expanded at a 3.2% rate in the second quarter, in line with expectations.

A separate report showed that the U.K. current account deficit widened to £23.1 billion in the last quarter, from a revised deficit of £20.5 billion in the first three months of the year. Analysts had expected the current account deficit to narrow to £17.0 billion in the second quarter.

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