EUR/USD close to two-week lows during late US trade on Friday

The euro traded in proximity to two-week lows against the US dollar during late phase of US session, after the Institute for Supply Management (ISM) reported that its index of manufacturing activity climbed to the highest level since April 2011, while the euro was still pressured by prospects of a potential rate cut by the European Central Bank (ECB).

Having touched a session low at 1.3480 at 14:55 GMT, the pairs lowest point since October 16th, EUR/USD closed at 1.3492 on Friday, falling 0.68% for the day. Support was likely to be found at October 16th low, 1.3474, while resistance was to be encountered at Fridays high, 1.3581.

The Institute for Supply Management reported earlier today that the index, gauging manufacturing activity in the United States, rose to a reading of 56.4 in October, or the highest point since April 2011, following a reading of 56.2 in September. Experts had anticipated that the index will slow down to 55.1 in October. Values above the key level of 50.0 are an indication that activity in the sector has expanded. Motor vehicle sales and recovery in the housing sector provided support to production, while at the same time global markets began to pick up. Released figures imply that the brinksmanship over the US budget, which closed the federal government for 16 days in October, did little to hurt the rebound in manufacturing sector since the middle of the year. The sub-indexes of new orders and output remained above the 60.0 level for a third consecutive month, according to data by ISM.

At the same time, Markit Economics said that the final value of its index of manufacturing for the United States advanced to 51.8 in October, after a reading of 51.1 in September, while median estimates pointed that the index will demonstrate no change in October.

The greenback was continuously supported also after on Friday James Bullard, Federal Reserve Bank of St. Louis President, said that in case labor market conditions in the country continued to improve, the central bank may indeed begin to scale back its asset purchases.

Meanwhile, the euro came under selling pressure, after on Thursday Eurostat reported that the preliminary annual consumer price index in the Euro zone, evaluated in consonance with the harmonized methodology, climbed 0.7% in October, marking the slowest pace since November 2009, after in September the index rose 1.1%. This data puts more pressure upon the European Central Bank (ECB) to increase the money supply and support economic activity. The ECB has said there was a “subdued outlook” for price growth in the common currency bloc, while the October data marked the ninth consecutive month, during which the inflation rate has been below bank’s 2% objective, a level considered as providing price stability.

At the same time, the rate of unemployment in the Euro zone reached a record level at 12.2% in September, after in August the rate has been revised up to 12.2% from 12.0% previously.

The European Central Bank will probably reduce its benchmark interest rate to 0.25% from the current 0.5% at its policy meeting in December, according to projections by JPMorgan Chase & Co.

Additionally, traders predict that the ECB will increase its main refinancing rate by 9.1 basis points during the next 12 months, or the least since July 19th, according to a Credit Suisse Group AG index.

Elsewhere, the euro traded steadily against the pound during late US session on Friday to close the week at 0.8472, marking a daily gain of a mere 0.02%.