Euro Falls Amid Risk Aversion

08:25, 30th October 2014

(RTTNews) - The euro weakened against other major currencies in the European session on Thursday amid risk aversion, as investors' sentiment declined after the Federal Reserve delivered a slightly more hawkish policy statement, prompting traders to offload positions.

The U.K.'s FTSE 100 index is currently down 0.77 percent or 49.61 points at 6,404; France's CAC 40 index is down 0.60 percent or 24.73 points at 4,085, and Germany's DAX is down 0.86 percent or 78.21 points at 9,004.

After ending its controversial long-running bond-buying program, the Federal Reserve described labor conditions as improving and sounded more hawkish than expected on inflation, signaling its intent that it is prepared to raise interest rates next year if the economic recovery continues to gather steam.

The hawkish tone by Fed policymakers bolstered the appeal of dollar and put downward pressure on commodities such as copper, crude and gold. The major U.S. averages saw considerable volatility before closing marginally lower overnight, as the Fed policy statement retained its "considerable time" phrasing.

Investors, who are also focusing on the geopolitical events after the North Atlantic Treaty Organization, said that there has been an "unusual" increase in the number of Russian military flights over European airspace in the last two days. In news out of Iraq, U.S.-led forces carried out a total of eight airstrikes targeting Islamic State of Iraq and the Levant (ISIL) terrorists in Syria in the last 48 hours using fighter and bomber aircraft, the U.S. military said.

Investors also look ahead to data on U.S. third-quarter gross domestic product and jobless claims due later in the day for further clues on whether the U.S. economy can maintain its positive momentum without the aid of stimulus programs.

In the economic news, data from European Commission showed that Eurozone economic confidence picked up in October from a 10-month low. The economic confidence index rose unexpectedly to 100.7 in October from 99.9 in the prior month. The score was expected to fall to 99.7.

Data from Federal Labor Agency showed that German unemployment declined unexpectedly in October. The number of people out of work decreased by 22,000 to 2.88 million in October. Economists had forecast an increase of 4,000.

In the Asian trading, the Euro was slightly higher against most major currencies.

In the European trading, the Euro fell to a 1-1/2 month low of 1.4288 against the Australian dollar, from an early high of 1.4411. The euro is likely to find support around the 1.40 region.

Against the U.S. and the Canadian dollars, the euro fell to nearly 4-week lows of 1.2554 and 1.4068 from early highs of 1.2638 and 1.4142, respectively. If the euro extends its downtrend, it is likely to find support around the 1.24 against the greenback and 1.39 against the loonie.

The euro slipped to a 3-day low of 0.7862 against the pound and a 2-day low of 137.03 against the yen, from early highs of 0.7904 and 137.71, respectively. On the downside, 0.77 against the pound and 135.12 against the yen are seen as the next support level for the euro.

Against the Swiss franc, the euro edged down to 1.2054 from an early 2-day high of 1.2064. The euro may test support near the 1.204 region.

Eurozone business climate indicator index and economic confidence index for October and German CPI data for October are due to be released.

At 9:00 am ET, U.S. Federal Reserve Chair Janet Yellen will deliver opening remarks at the Board of Governors of the Federal Reserve System's National Summit on Diversity in the Economics Profession in Washington DC.