The EUR/USD fell to a more than six-month low of 1.0685 in the European session. The pair would subsequently consolidate at 1.0695, declining 0.6%. The EUR/USD faces immediate support at the psychological 1.06 level and resistance at 1.0962.
Meanwhile, the US dollar strengthened across the board on Tuesday. The dollar index, a weighted average of the greenback against a basket of six currencies including the euro, rose 0.3% to 99.29.
Underscoring the dollar’s recent strength is the expectation that the United States Federal Reserve will begin raising interest rates next month for the first time in nearly a decade. On Friday the Labor Department announced that US employers added 271,000 jobs last month, the biggest increase since December 2014. The unemployment rate also fell to a new seven-and-a-half year low of 5%.
The EUR/USD has declined around 200 pips since Friday’s nonfarm payrolls report.
Meanwhile, the European Central Bank has remained steadfast in its commitment to supporting the euro area economy with more stimulus should inflation remain at zero or turn negative in the coming months. Expectations for an expanding policy agenda in the euro area is keeping a lid on the EUR/USD exchange rate.
In economic data news, China’s consumer inflation continued to slow in October, adding further evidence of slack demand in the world’s second-largest economy.
China’s consumer price index fell 0.3% in October, which translated into a year-over-year rate of 1.3%, government data showed on Tuesday. A median estimate of economists called for an annualized rate of 1.5%.
Meanwhile, producer prices declined for a 44th consecutive month, as mainland manufacturers continued to battle weak international demand and excess production capacity. The producer price index plunged 5.9% over year-ago levels.
Chinese stocks closed lower on Tuesday, with the Hang Seng Index falling 325.07 points or 1.4% to 22,401.70. The benchmark Shanghai Composite Index closed down 0.2% at 3,640.49.
European stocks traded mixed in the intraday session. The pan-European STOXX 600 Index was little changed. London’s FTSE 100 Index was down 0.3%.
American stock futures were down ahead of the opening bell. The Dow Jones Industrial Average posted a triple-digit loss on Monday, as investors weighed the impact of a US rate increase next month.