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Euro Falls As Weak Eurozone Data Bolster ECB Stimulus Hopes

The euro declined against its major rivals in European deals on Thursday, as Eurozone’s economic confidence index in December and producer prices in November came in weaker-than-expected, cementing hopes for the European Central Bank to launch quantitative easing program at January 22 meeting.

Survey by the European Commission showed that Eurozone economic sentiment index came in at 100.7 in December, down from expectations for a reading of 101.2.

The industrial confidence index fell to -5.2 in December from -4.3 in November. The decline was fueled by managers’ more pessimistic appraisals of the stocks of finished products, the current level of overall order books and expected production.

Eurozone producer prices decreased more than expected in November on a sharp fall in energy prices, data from Eurostat revealed.

Producer prices dropped 1.6 percent year-on-year in November, faster than the 1.3 percent decrease in October. Economists had forecast prices to decline 1.4 percent.

Flash estimate from Eurostat showed yesterday that Eurozone slipped into deflation in December, bolstering bets for bolder stimulus by the central bank as soon as this month.

The euro has been weaker this week, on hopes of the ECB launching QE program at the earliest, as well as on concerns over Greek’s political uncertainty and falling oil prices.

The single currency hit 1.1761 against the greenback, a level not seen since November 2005. The euro thus lost 0.7 percent from Wednesday’s closing value of 1.1838. The next possible downside target for the euro-greenback pair is seen around the 1.15 zone.

The euro fell to a 3-day low of 0.7810 against the pound, off early 2-day high of 0.7855. If the common currency extends slide, 0.775 is likely seen as its next support level.

U.K. house prices increased more than expected in December, survey data from the Lloyds Banking Group unit Halifax showed.

House prices increased at a faster pace of 0.9 percent month-on-month in December after rising 0.4 percent in November. The monthly growth rate was expected to slow to 0.3 percent.

The euro, which climbed to a 2-day high of 141.72 against the yen in early deals, edged down to 140.97. Next key support for the euro may be found around the 140.00 mark.

The single currency eased back against the franc from an early 2-day high of 1.2012. Further weakness may see the euro violating the peg rate of 1.20.

The euro was lower against the commodity currencies too, touching 2-1/2-year low of 1.5063 against the NZ dollar, 1-1/2-month lows of 1.4511 against the Australian dollar and 1.3894 against the Canadian dollar. Continuation of the euro’s bearish trend may see it challenging support around 1.50 against the kiwi, 1.44 against the aussie and 1.375 against the loonie.

Looking ahead, the Bank of England will announce its rate decision at 7 am ET. The bank is expected to retain its base rate at 0.50 percent and its asset purchase facility at GBP 375 billion.

The U.S. weekly jobless claims for the week ended January 3 and consumer credit for November and Canada new housing price index for the same month are due in New York session.

by RTT Staff Writer

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