The EUR was trading close to session highs against the dollar on Tuesday after data showed that the U.S. service sector expanded in January at a slower pace than in the previous month. EUR/USD hit 1.3568 during U.S. morning trade, the session high; the pair subsequently consolidated at 1.3549, gaining 0.27%. The pair was likely to find support at 1.3457, the session low and resistance at 1.3593, the high of January 31. In a report, the Institute of Supply Management said its non-manufacturing purchasing manager’s index fell to 55.2 in January from a reading of 55.7 the previous month, in line with expectations. The single currency hit session highs earlier after data showed that the euro zone services purchasing managers’ index improved to a 10-month high in January, adding to signs of a recovery in the region. The Markit euro zone services purchasing managers’ index rose to 48.6 in January from a final reading of 47.2 the previous month and above the preliminary reading of 48.3. The data overshadowed concerns over political tensions in Spain and Italy which pushed peripheral borrowing costs higher on Monday and drove the single currency from 14-month highs against the dollar. The euro briefly trimmed gains after a separate report showed that retail sales in the bloc dropped 0.8% in December, worse than expectations for a 0.5% fall, while November’s figure was revised lower. The euro extended gains against the pound with EUR/GBP rising 0.55% to 0.8620 and was trading close to 33-month highs against the broadly weaker yen, with EUR/JPY jumping 1.02% to 126.09. The pound shrugged off data showing that the U.K. services sector expanded at the fastest pace in four months in January, as fears over the threat of a triple-dip recession and the risk of the U.K. losing its triple-A sovereign rating weighed. Meanwhile, the yen remained broadly weaker amid expectations that Japanese Prime Minister Shinzo Abe would keep pressure on the Bank of Japan to step up easing measures aimed at combating deflation.
EasyForexNews Research Team