EUR/USD hit 1.2226, the pair’s lowest since Thursday; the pair subsequently consolidated at 1.2247, falling 0.60% in early afternoon U.S. trade
The pair was likely to find near-term support at 1.2116, Thursday’s low and resistance at 1.2328, Thursday’s high.
Expectations mounted that the ECB is set to announce fresh policy measures to tackle the long running crisis in the euro zone at Thursday’s policy meeting, after bank head Mario Draghi pledged last week to do whatever is necessary to preserve the euro.
But market sentiment remained fragile amid concerns that the ECB could disappoint market expectations.
Meanwhile, concerns over the outlook for the euro zone persisted after official data showed that Spain’s economy contracted 0.4% in the three month to June, extending the recession into a third quarter.
A separate report showed that the European Commission’s index of economic sentiment across the euro area dropped to a 34 month low in July, with confidence in Spain, Germany and France all dropping sharply.
Meanwhile, investors were looking ahead to the outcome of the Federal Reserve’s policy setting meeting on Wednesday, amid speculation over whether the bank will hint at further easing measures.
On Friday, the Commerce Department reported U.S. gross domestic product expanded by 1.5% in the three months to June, after growing by an upwardly revised 2.0% in the first quarter.
Investors have interpreted signs of slowing U.S. economic growth as increasing the likelihood that the Federal Reserve will implement more stimulus measures to shore up the economic recovery.
The euro was fractionally lower against the pound, with EUR/GBP dipping 0.07% to 0.7816 but dropped sharply against the yen, with EUR/JPY falling 0.79% to 95.87.
Later Monday, U.S. Treasury Secretary Timothy Geithner was to meet with German Finance Minister Wolfgang Schaeuble and Mario Draghi to discuss the European, U.S. and global economies.
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