EUR/USD little changed, close to eight-month highs due to US political deadlock

The euro was slightly changed against the US dollar on Friday, trading in proximity to eight-month highs, as the political deadlock in the United States continued to cause pressure on the greenback.

EUR/USD touched a session high at 1.3630 at 6:38 GMT, after which consolidation followed at 1.3620, ticking up a mere 0.01% for the day. Support was likely to be received at October 2nd low, 1.3506, while resistance was to be met at February 4th high, 1.3658.

US dollar was under continuous pressure amid uncertainty over the possible implications on US economic recovery after the partial US government shutdown. President Barack Obama said that there was only “one way out” of this situation for Republican House Speaker John Boehner – to allow a vote on a stopgap spending bill without conditions, Bloomberg reported. The US Treasury Department warned in a report on Thursday that failure to lift the debt ceiling could have “the potential to be catastrophic”, as this could cause credit markets to freeze and the value of the US dollar to decrease.

In addition, Fed President for Atlanta Dennis Lockhart said yesterday that the insufficient economic data would tend to introduce caution among Fed policymakers whether to trim the pace of asset purchases.

Also, it became clear that the US Labor Department will not release the report on non-farm payrolls, scheduled later on trading Friday, because of the partial US government shutdown. An alternate date, on which this report could be published, was not yet announced. The report encompasses data regarding new hiring in the non-farm sector and the rate of unemployment in the United States, a report of utmost importance for economy, as it was cancelled due to the budget deadlock in Washington. At a meeting on Wednesday between President Barack Obama and congressmen no agreements on the budget matter were reached.

Another selling impulse for the greenback was submitted on Thursday after the Institute for Supply Management (ISM) reported that its index, gauging business activity in the sector of services, unexpectedly fell to a reading of 54.4 in September from 58.6 in August. The median estimate by experts pointed a drop to 57.0.

Meanwhile, in the Euro zone, a report showed that German producer prices dropped 0.5% in August on annual basis, eliminating the 0.5% increase, registered in July, while expectations pointed that prices will remain unchanged.

According to official data, released yesterday, retail sales in the euro zone climbed more than expected in August, gaining 0.7% on a monthly basis, while preliminary estimates pointed a 0.2% increase. July’s result was revised up to a 0.5% gain from a 0.1% gain previously.

Elsewhere, the euro was up against the sterling, as EUR/GBP cross gained 0.30% on a daily basis to trade at 0.8456 at 8:06 GMT. EUR/JPY pair, on the other hand, was losing 0.12% to trade at 132.31 at 8:08 GMT.