Forex - EUR/USD reverses heavy losses from Fitch comments

Forexpros - The euro erased losses against the dollar Thursday after plummeting in wake of comments out of the Fitch Ratings agency that the European Central Bank needs to do more to end the debt crisis, including reversing current policy stances.

EUR/USD hit 1.2718 in early Asian trading Thursday, up 0.09%, up from a session low of 1.2707 and off from a high of 1.2723.

The pair was likely to find support at 1.2662, Wednesday's low, and test resistance at 1.2818, Tuesday's high.

In Europe, David Riley, the head of sovereign ratings for Fitch, said the ECB needed to do more to end the crisis, including consider stepping in and buying government debt held by banks, a process known as quantitative easing.

ECB officials have refused to carry out such policies on the grounds that it would violate its mandate to keep inflation rates in check.

Riley warned, however, that not considering quantitative easing could mean the collapse of the currency zone.

"The end of the euro would be cataclysmic. The euro is a reserve currency," said Riley, according to Reuters.

"What would that do in terms of financial and political stability?"

ECB officials are due to meet later Thursday to discuss monetary policy.

The news sent the euro down to a 16-month low against the dollar although the unit later bounced back in early Asian trading on Thursday.

Market observers point out uncertainty and roiling markets aren't going away anytime soon.

"The Europe contagion story will linger around for quite a bit longer," said Matthew Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney, according to Bloomberg.

"There's the ECB, as well as the Spanish and Italian auctions today, so it should be interesting to see whether there's demand. If they don't go off well, I think certainly the euro will be under pressure."

Reports that the European economy grew by a revised 0.1% instead of an expected 0.2% in the third quarter repelled investors away from the euro as well.

In the U.S., meanwhile, the Federal Reserve released its Beige Book, which depicted a moderately growing U.S. economy.

The euro was up against the pound and also against the yen, with EUR/GBP gaining 0.08% to 0.8296 and EUR/JPY rising 0.14% at 97.79.

Later Thursday, New Zealand will release data on house price inflation.

The U.K. is to release an official report on manufacturing production, a key indicator of economic health, while the National Institute of Economic and Social Research is to publish its monthly estimate of GDP.

Later in the day, the Bank of England will announce its latest moves to its benchmark interest rates.

In the eurozone, the ECB is to announce its decisions on the direction of benchmark interest rates, while also in Europe, industrial production figures will release as well.

Canada is to produce official data on new house price inflation, a leading indicator of demand in the housing sector.

Later Thursday, the U.S. is to release official data on retail sales and initial jobless claims.

The U.S. will also unveil government data on business inventories, a signal of future business spending, followed by a report on the federal budget balance.







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