Investing.com - The euro was sharply lower against the dollar on Thursday after the Federal Reserve said it could start tapering asset purchases by the end of this year, while weak data out of the euro zone also weighed.
hit 1.3181 during European afternoon trade, the pair’s lowest since June 10; the pair subsequently consolidated at 1.3199, shedding 0.71%.
The pair was likely to find support at 1.3176, the low of June 10 and resistance at 1.3300, the session high.
The dollar strengthened across the board after Fed Chairman Ben Bernanke said the bank could begin tapering its USD85 billion-a-month asset purchase program later this year and wind it down completely by the middle of 2014 if the economy picks up as the central bank expects.
The bank said it expects the U.S. economy to grow between 2.3% and 2.6% in 2013. The Fed also said it expects the unemployment rate to fall to between 6.5% and 6.8% by the end of 2014 and inflation to edge closer to its 2% target.
The euro came under pressure after data showed that manufacturing activity in Germany contracted more than expected in June.
Germany’s manufacturing purchasing managers’ index fell to 48.7 in June compared to expectations for a reading of 49.8 and down from a final reading of 49.4 in May.
Activity in Germany’s services sector rose to a four-month high, with the services PMI improving to 51.3 from 49.7 in May.
The euro zone manufacturing PMI rose to 48.7 in June from a final reading of 48.3 in May, but remained well below the 50 level that separates contraction from expansion.
The bloc’s services PMI rose to a 15-month high of 48.6 from 47.2 in May, above expectations for an increase to 47.5.
Market sentiment was also hit by concerns over a slowdown in China after data on Thursday showed that China’s HSBC preliminary manufacturing PMI fell to a nine month low of 48.3 in June from 49.2 in May.
The euro fell to session lows against the pound, with down 0.49% to 0.8541, but was higher against the weaker yen, with rising 0.88% to 129.32.
The U.S. was to release the weekly government report on initial jobless claims, in addition to data on existing home sales and the Philly Fed manufacturing index later in the trading day.