EUR/USD touches one-week lows on euro zone data, Fed taper outlook

The euro declined against the US dollar, following data that showed the M3 money supply in the euro zone expanded less than expected, while private loans declined for a 20th straight month. Meanwhile, the greenback remained to be supported by expectations for further stimulus cuts at FOMCs two-day meeting, due to be concluded later today.

EUR/USD hit a session low at 1.3629 at 12:45 GMT, after which consolidation followed at 1.3634, losing 0.27% for the day. Support was likely to be received at January 23rd low, 1.3529, while resistance was to be encountered at 28th high, 1.3688.

Euros demand was pressured after an ECB report revealed the M3 money supply in the common euro area increased at an annualized rate of 1% in December, short of analysts expectations for a 1.7% advance. The M3 money supply rose 1.5% in the previous month.

A separate report added to bearish sentiment, as it showed loans to euro zones private sector decreased at an annualized pace of 2.3%, marking a 20th consecutive month of declines. Loans to private sector fell in line with analysts expectations and after they dropped 2.3% in November.

Meanwhile, greenback’s demand continued to be underpinned by expectations for stimulus cuts at FOMC’s two-day meeting, which concludes later today.

The greenback was pressured after US Commerce Department reported yesterday that durable goods orders plunged 4.3% in December, confounding analysts’ expectations for a 1.8% increase. Bookings for durable goods or those meant to last at least three years were downward revised in November to a 2.6% advance from a previously estimated 3.4% gain.

Core durable goods orders or those excluding the volatile transportation items, declined 1.6% in December, the largest slump since March, defying analysts’ forecasts for a 0.5% advance. Orders for core capital goods, excluding defense, fell 3.7%% last month, confounding projections for a 1% gain and after a downward revised increase of 2.7% in November.

However, data showed that the consumer confidence rose for a second month, reaching 80.7 in January, the highest since August, exceeding analysts’ forecasts of an increase to 78.0. In November the consumer confidence stood at 77.5.

The downbeat reports on the durable goods orders did little to alter the overall market expectations for stimulus cuts at FOMC’s two-day meeting, which concludes later today.

According to the median estimates by experts in a survey by Bloomberg conducted on January 10th, the Federal Open Market Committee will probably reduce the monthly pace of bond purchases from the current 75 billion USD by increments of 10 billion USD at every policy meeting to exit the program this year.

Elsewhere, GBP/USD reached a session high at 1.6606, after which consolidation followed at 1.6595, adding 0.1% for the day. Support was likely to be received at January 28th low, 1.6538, while resistance was to be encountered at January 28th high, 1.6626. On January 24th, GBP/USD touched 1.6668, the pair’s highest since May 2nd 2011.