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Forex - EUR/USD rises on German sentiment, Fed vagueness

Published 07/17/2012, 09:17 PM
Updated 07/17/2012, 09:21 PM

Investing.com - The euro rose slightly against the dollar in Asian trading on Wednesday after investors looked past Fed Chairman Ben Bernanke's congressional appearance, where he offered no new hints as to a need for monetary stimulus.

Better-than-expected German sentiment numbers gave the pair some support.

In Asian trading on Wednesday, EUR/USD was trading up 0.04% at 1.2299, up from a session low of 1.2290 and off from a high of 1.2306.

The pair was likely to find support at 1.2176, the low from July 16, and resistance at 1.2316, the high from July 17.

The dollar rose against the euro earlier after Ben Bernanke offered no new hints at a need for monetary stimulus while testifying before Congress.

Stimulus measures tend to weaken the greenback in exchange for a more robust economy.

While the Fed is not preparing to act now, it won't shut the door on it either.

"Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to the economic outlook, the Committee made clear at its June meeting that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," Bernanke told lawmakers.

Bernanke did warn lawmakers to address an upcoming fiscal adjustment, when tax breaks expire and spending cuts kick in at year end, a combination known as a fiscal cliff, which could knock the economy right back into recession next year if Congress fails to act.

The dollar cooled its gains against the euro early in Asian trading, as Bernanke will appear before Congress again later Wednesday and is also due to release its Beige Book, a group of summaries on the nation's economy, which gave investors more time to wait and see whether to embrace a risk-on or risk-off trading session.

Meanwhile in the U.S., inflation came in a little better than expected, which pressured the dollar downwards.

The U.S. consumer price index was unchanged in June from May, and rose just 0.2% when stripped of volatile food and energy prices, the Commerce Department reported earlier Tuesday.

Markets were expecting the inflation rate to decline 0.1%, while core inflation met expectations at 0.2%.

The euro, meanwhile, saw further support on German business sentiment figures, which came in a little better than expected.

The ZEW Centre for Economic Research reported that its index of German economic sentiment fell to -19.6 in July from June’s reading of -16.9, but was slightly better than expectations for a decline to -20.0.

In the eurozone, interest rates fell on shorter-term Spanish debt, however, the yield on the country’s benchmark 10-year bond hit 6.76%, not far from the 7% threshold deemed unsustainable by the markets.

The euro, meanwhile, was down against the pound and up against the yen, with EUR/GBP down 0.04% at 0.7853 and EUR/JPY trading up 0.05% at 97.25.

Later Wednesday, the U.S. will release data on building permits, and a report on housing starts.

The country is also to release government data on crude oil stockpiles.

Federal Reserve Chairman Ben Bernanke is to testify for a second day on the on the central bank’s monetary policies report before Congress.

The Fed will also release its Beige Book later in the day.







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