EUR/USD edges lower as Spanish unemployment touches 1-year high

The euro declined against the US dollar, following a report that revealed the number of unemployed people in Spain, significantly increased in January to the highest in almost a year, boosting concerns over the economic outlook of the fourth-largest euro zone economy.

EUR/USD hit a session low at 1.3494 at 08:20 GMT, after which consolidation followed at 1.3510, losing 0.14% for the day. Support was likely to be received at February 3rd low, 1.3478, also the pairs weakest since November 22nd, while resistance was to be met at January 31st high, 1.3568.

The Spanish Ministry of Employment reported today that the number of unemployed people rose by 113 097 in January, defying analysts projections for a decline of 21 300 people. Januarys reading was the strongest increase in unemployment, since February 2013, when 132 100 people filed for jobless benefits and came after a sharp drop in December, when 107 570 less people claimed unemployment benefits.

The 18-nation common currency continued to be pressured by the weak price pressure in the euro area, which boosted speculation that ECB’s policy makers may have to cut interest rates at the upcoming meeting this Thursday.

“There’s a good chance of additional monetary easing in the euro region if disinflation persists; I’d recommend selling euro-dollar on a rebound,” said Daisaku Ueno, the Tokyo-based chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan’s biggest financial group by market value, cited by Bloomberg.

Eurostat reported on Friday that consumer prices in the euro area rose at an annualized pace of 0.7% in January, after a 0.8% increase in the previous month. Analysts had estimated that consumer prices will increase by 0.9% in January. This was a fourth straight reading of inflation under 1%, while the ECB tries to maintain inflation at just below 2%.

A separate report revealed that the inflation in the largest economy in the euro zone, Germany, unexpectedly remained steady at 1.2% in January, defying analysts projections of an increase to 1.3%. The low German inflation just added to evidence of weak price pressure in the 18-nation common currency area.

In November, the central bank unexpectedly cut its benchmark interest rate to a record-low 0.25%, after inflation in the euro area slowed its pace to 0.7%. The European Central Bank’s policy makers are scheduled to next meet on February 6th.

The weak inflation rate in the euro zone was mainly driven by a 1.2% slump in energy prices, today’s report showed. Core consumer prices, which exclude volatile items such as energy, tobacco and alcohol, however, increased by 0.8% this month, after a 0.7% advance in December.

Meanwhile, greenbacks demand was heavily pressured yesterday, after the US Institute for Supply Management (ISM) reported its manufacturing index declined to the lowest level in seven months in January, due to a slump in new orders.

The report revealed that the manufacturing index stood at 51.3 in January, down from December’s reading of 57.0, while analysts had projected that the index will slow down to 56.0 in January. Data also showed that new orders plunged at the fastest pace since December 1980, as the new orders sub-index declined to 51.2 in January from 64.4 in the previous month. Most of the companies cited the bad US weather conditions last month as the main reason for the decreased number of new orders.

A report by the US Census Bureau later today may show the US factory orders declined by 1.8% in December, following November’s 1.8% increase. A higher-than-expected reading will certainly heighten the appeal of the US dollar.

Elsewhere, AUD/USD climbed to a daily high at 0.8914 at 7:20 GMT, also the pair’s highest point since January 15th, after which consolidation followed at 0.8909, surging 1.79% for the day. Support was likely to be found at current session low, 0.8731, while resistance was to be met at January 15th high, 0.8971.