Tuesday, August 2, 2011

Euro managed to trim losses against the Greenback

Previous session overview
The Euro managed to trim losses against the Greenback, rising near 100 within the last hour, after weaker-than-expected US data. US personal consumption expenditures fell 0.2% in June.

EUR/USD jumped to USD1.4250, from the USD1.4150 zone where the pair set a fresh 2-week low right before the data.

Markets were disappointed after data showed Americans cut their spending by the most in nearly two years and saved at a faster rate during June, a pair of signs that underscored the economy's lack of vigor. 

Spending decreased 0.2% after rising an upwardly revised 0.1% in May, according to the Commerce Department. The drop was the biggest since September 2009. Incomes rose 0.1%, after increasing 0.2% in May. 

The Canadian dollar was slightly weaker but the currency is likely to trade range bound ahead of Friday's release of key Canadian and U.S. employment data. 

The U.S. dollar was stronger Tuesday morning, at CAD0.9576, from CAD0.9571 late Monday.
Market expectation
Investors remained downbeat even as the House passed a USD2.4 trillion increase in the federal borrowing limit Monday night. The Senate plans to follow suit on Tuesday. Congressional approval, along with President Barack Obama's signature, would raise the government's debt limit just before the U.S. government would become unable to meet all its obligations.

Amid signs of equity market weakness, the U.S. dollar could test the resistance level of CAD0.9640, as investors reduce their appetite for risk, said dealers. Meanwhile, support is seen around CAD0.9540 if stocks gain and encourage greater risk taking. However, the latest U.S. personal income and spending data released Tuesday fell short of expectations, a negative sign for equities as the U.S. economic rebound continues to struggle.