RTTN:Euro Pares Asian Session Gains Against Majors
(RTTNews) - The euro erased its Asian session gains against most of its major rivals in early deals Tuesday as risk-aversion returned in the market after Moody's lowered the European Union's long-term issuer rating outlook and Spain's Andalusia joined the 'bailout club.'
The market is keenly awaiting for the European Central Bank meeting, which is scheduled on Thursday. Some economists expect the central bank will cut its key rate to a new historic low of 0.50 percent from 0.75 percent while some others are expecting a stand-pat stance.
However, it is widely expected that the ECB President Mario Draghi would unveil the program to buy securities with maturities in the three-year range.
Moody's Investor Service lowered the European Union's long-term issuer rating outlook to "negative" from "stable", reflecting the negative outlooks now assigned to the 'Aaa' sovereign ratings of key contributors to the EU budget, namely Germany, France, the U.K. and the Netherlands.
These nations together account for around 45 percent of the EU's budget revenue. The EU's creditworthiness move is in line with the creditworthiness of its strongest key member states, the ratings agency said.
According to Westpac analysts, ECB president Mario Draghi's comments leaked on Monday pushed the EUR/USD pair higher in the Asian session. The pushing statement was that the European Central Bank would purchase sovereign bonds up to three years in maturity without the support of state financing.
The European stocks are trading notably lower today, with the French CAC 40 Index dropping 0.61 percent, the German DAX Index falling 0.60 percent and the U.K.'s FTSE 100 Index slipping 1.14 percent.
In economic news, output price inflation in the euro area remained unchanged in July, but exceeded economists' expectations, data released by statistical office Eurostat showed today.
The producer price index rose 1.8 percent year-on-year in July, as it did in the previous month. Economists had forecast a slower growth of 1.6 percent.
Month-on-month, output prices advanced 0.4 percent in July, recovering from the previous month's 0.5 percent decrease. Economists had forecast prices to rise 0.2 percent sequentially.
The euro reached as low as 98.66 against the yen before leveling off around 7:05 am ET, down from a 4-day high of 99.04 hit earlier in the Asian session. Technical bias is neutral for the pair as it is hanging around the 23.6 percent retracement range between a high in March and a low in July.
The euro also pared its Asian session advance against the pound in early deals Tuesday. Although the unexpected shrinking of the U.K. construction PMI pushed the EUR/GBP pair to as high as 0.7941, it failed to sustain momentum above this level and fell to 0.7930.
(RTTNews) - The U.K. construction sector shrank unexpectedly in August to its second-lowest reading since February 2010 on another reduction in production and new orders, survey results from Markit Economics showed today.
The Markit/Chartered Institute of Purchasing & Supply Construction Purchasing Managers' Index dropped to 49 from 50.9 in July. Economists had forecast the index to fall to 50 in August.
The euro that advanced to a 4-day high of 1.2629 against the US dollar in the Asian session depreciated almost 0.4 percent to reach a low of 1.2583 around 7:00 am ET. Although the euro-buck pair is staying above the 38.2 percent retracement level of 1.2608 between a high in March and a low in July, the near-term bias is quite neutral for the pair.
Against the Switzerland currency, the euro is now trading at 1.2012, down from a 5-day high of 1.2014 hit earlier in the session. The pair has been in a squeeze-through range for a past few months as the Swiss National Bank continue its stiff-stand on EUR/CHF ceiling at 1.20.
Switzerland's economy contracted modestly in the second quarter, defying economists' forecast for an expansion, latest figures from the State Secretariat For Economic Affairs showed today.
Gross domestic product (GDP) decreased a seasonally adjusted 0.1 percent quarter-over-quarter, reversing the 0.5 percent growth recorded in the first quarter, which was revised down from 0.7 percent. Economists had forecast the economy to grow by 0.2 percent.
Year-on-year, GDP increased 0.5 percent in the second quarter, notably slower than the 1.2 percent gain seen in the preceding three-month period. Economists were looking for a 1.6 percent annual growth.
