EUR/USD climbed to session highs after US retail sales, PPI

The euro advanced to its highest level against the US dollar on trading Friday, following a report to show that US retail sales rose at a slower pace than projected in August, while investors were eyeing the Federal Reserves meeting on policy next week.

EUR/USD touched a session high at 1.3320 at 12:40 GMT, after which consolidation followed at 1.3311, gaining 0.10% for the day. Support was likely to be found at September 11th low, 1.3244, while resistance was to be seen at August 28th high, 1.3398.

Earlier today the Department of Commerce said that retail sales in the United States rose by 0.2% in August, less than projections of a 0.5% advance, but yet Augusts sales appeared stronger than expected in June and July. Julys sales figure was revised up to a 0.4% gain from a 0.2% gain previously. This recorded increase in sales was the slowest since April and was mostly contributed by better sales of automobiles, electronics and house furniture. Retail sales, excluding automobiles, increased a mere 0.1% in August compared to July, while preliminary estimates pointed a 0.3% gain. The slower rate of increase in sales in August was compensated by a better performance during the preceding two months. Retail sales are a crucial indicator, as they represent one third of the overall consumer spending in the United States, while spending is a major driving force to economic growth.

A separate report showed that the index of producer prices (PPI) in the country increased by 0.3% in August, supported by higher fuel and food costs, after prices remained flat in July. The core producer price index (PPI), which excludes volatile components such as food and energy, was unchanged in August, after the 0.1% uptick, registered in July. Experts had anticipated that the overall PPI will rise by 0.2% and the core PPI – by 0.1%. Prices of energy products climbed 0.8%, while wholesale prices of food advanced 0.6% in August, as the latter were boosted by a jump in prices of vegetables. The annual overall PPI rose by 1.4% and the annual core PPI – by 1.1%.

This data points came, as market players began focusing on the two-day meeting on policy by the Federal Reserve Bank next week, as most experts projected a possible reduction of scale of stimulus to 75 billion USD from the current monthly pace of 85 billion USD of bond purchases.

Meanwhile, in the Euro zone, employment continued to decrease, recording a 0.1% dip during the second quarter of the year compared to the first. However, the drop during the period April-June was the slowest since Q3 2012. During Q1 2013 employment dropped by 0.4%, which was a revision up from a 0.5% drop previously. The number of employed people in the common currency zone amounted to 145 million during the second three months of this year, or a 1% decrease in comparison with the number, recorded during the second quarter of 2012.

At the same time, Russia and the United States agreed today to push again for an international conference with a purpose to end Syrias civil war, as talks on removing chemical weapons raised hopes for broader negotiations. As the diplomacy continued in Geneva, Syrian President Assads forces were commencing an offensive against rebel-held suburbs of Damascus, opposition activists and residents said. Warplanes and artillery were bombing and shelling, mostly in the Barzeh neighborhood, where there were also clashes on the ground, Reuters imparted.

Elsewhere, the euro was losing ground against the sterling, as EUR/GBP cross dropped 0.53% to trade at 0.8371 at 13:39 GMT. EUR/JPY pair was also on negative territory, down by 0.20% for the day to trade at 132.13 at 13:41 GMT.