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Euro Declines On Risk Aversion, Slowdown In Eurozone Business Activity

The euro slipped against its most major counterparts in European deals on Tuesday, as Eurozone economic activity expanded less than initially estimated in December, while tumbling oil prices sparked risk aversion.

Survey data from Markit Economics showed that Eurozone final composite output index rose to 51.4 in December from 51.1 in November. The index was below the flash estimate of 51.7.

The rate of growth remained among the weakest seen over the past year-and-a-half. Nonetheless, the sector expanded for the eighteenth successive month in December.

Bent crude held below $ 50 per barrel amid concerns about a surplus of global supplies and lacklustre demand.

Market participants are also concerned about impending Greek elections and possibility of Greece leaving the Eurozone.

Greece holds parliamentary elections on January 25, with the left-wing Syriza party leading the opinion polls. Syriza intends to cancel austerity measures implemented under Samaras’ present government and renegotiate the provisions of the Greek bailout with the European Union, which they oppose adamantly.

The euro has been under pressure since last week, when the European Central Bank President Mario Draghi backed pledge to act more to rescue the Eurozone from stagnation.

His comments fanned speculation that the ECB is moving closer to unleashing full-blown quantitative easing, including sovereign bond purchases, at the earliest.

The single currency pared gains to 1.1919 against the greenback, from an early high of 1.1968. On the downside, 1.18 is seen as next support level for the euro.

The euro slipped to 141.69 against the Japanese yen, a level not touched since November 4, 2014. The euro may find support around the 141.00 zone.

The monetary base in Japan surged 38.2 percent on year in December, the Bank of Japan said today, coming in at 267.401 trillion yen.

That follows the 36.7 percent annual spike in November.

The euro eased back to 1.2012 against the Swiss franc. If the euro extends slide, it may breach peg rate of 1.20.

The 19-nation currency fell to a 1-1/2-year low of 1.5390 against the NZ dollar and near a 5-month low of 1.4644 against the Australian dollar, compared to yesterday’s closing quotes of 1.5513 and 1.4755, respectively. The euro is poised to challenge support around 1.526 against the kiwi and 1.45 against the aussie.

Pulling away from an early high of 1.4063 against the loonie, the euro edged down to 1.4025. The euro is likely to find support around the 1.395 level.

Meanwhile, the euro rose to a session’s high of 0.7848 against the pound, up from Monday’s closing value of 0.7822. The next possible resistance for the euro-pound pair is seen around the 0.79 mark.

The pound was under pressure after U.K. services PMI, which eased more than expected to a 19-month low in December.

The seasonally adjusted Markit/ CIPS business activity index fell notably to 55.8 in December from 58.6 in the previous month, data showed.

Looking ahead, Canada industrial product price index for November, U.S. ISM non-manufacturing composite index and Markit’s final services PMI for December and factory orders for November are set for release in the New York session.

by RTT Staff Writer

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