Forex – EUR/USD bounces off 20-month low, but gains seen limited

The euro edged higher against the U.S. dollar on Thursday, bouncing off a 20-month low after data showed that the German business climate remains solid in November, although ongoing support for the greenback limited the single currency’s gains.

eased off 1.0518, the pair’s lowest since March 2015, to hit 1.0576 during European morning trade, up 0.21%.

The pair was likely to find support at 1.0518, the session low and resistance at 1.0647, Wednesday’s high.

The Ifo institute said its ticked down to 110.4 this month from 110.5 in October, but still strong. Economists had expected a reading of 110.5.

The euro’s gains were expected to remain limited however, as the greenback was still supported by expectations that President-elect Donald Trump’s plans to ramp up fiscal spending and cut taxes will spur economic growth and inflation.

Faster growth would spark inflation, which in turn would prompt the Fed to tighten monetary policy a faster rate than had previously been expected.

The U.S. dollar has also been boosted by bets that the U.S. central bank will almost certainly raise interest rates next month.

Fed Chair Janet Yellen on Thursday reiterated that a rate hike “could well become appropriate relatively soon.”

The euro was also higher against the pound, with adding 0.12% to 0.8498.

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