Forex - Euro hits 2-month highs against weaker dollar

The euro hit two-month highs against the broadly weaker dollar on Wednesday as recent soft economic data fuelled expectations that the Federal Reserve will maintain its monetary easing program.

EUR/USD hit 1.3222 during European afternoon trade, the pair’s highest since February 25; the pair subsequently consolidated at 1.3218, gaining 0.39%.

The pair was likely to find support at 1.3159, the session low and resistance at 1.3289, the high of February 21.

Investors were awaiting the outcome of the Fed’s latest policy meeting later in the trading day after recent soft economic data saw investors trim back expectations for an earlier-than-expected end to the bank’s asset purchase program.

Data on Tuesday showed that the Chicago purchasing managers’ index slumped to the lowest level since September 2009 in April.

The data came after a report last week showed that the U.S. economy grew 2.5% in the first quarter, falling short of expectations for 3.0% growth.

The euro pushed higher despite growing expectations that the European Central Bank would cut rates at its meeting on Thursday after recent comments by ECB official indicated that the bank would consider adjusting rates if economic data continued to deteriorate.

Data on Tuesday showed that euro zone unemployment rose to a record 12.1% in March, while inflation fell more-than-expected in April.

The euro was higher against the pound and the yen, with EUR/GBPrising 0.13% to 0.8486 and EUR/JPY climbing 0.41% to 128.77.

Trade volumes looked set to remain thin on Wednesday, with many bourses in Europe shut for the Labor Day holiday.

Later Wednesday, the U.S. was to release data on ADP nonfarm payrolls, while the Institute of Supply Management was to publish its report on manufacturing activity.

-->