05, June 2013

EUR/USD (a 4-hour chart)

After almost reaching the 3-year high point the euro slowed its growth. The dollar fell sharply against major currencies on Monday after a disappointing production report prompted investors to turn off betting on the fact that the U.S. economic recovery will not continue to support the U.S. currency.

The Institute for Supply Management report showed that manufacturing activity in May fell to its lowest level in nearly four years. This caused a fall of the dollar below 100 Japanese yen for the first time since May 9. After that publication the dollar also fell to a three-week low level against the euro.

Weaker data also raised concerns about the economic recovery in the U.S. and expectations that the Federal Reserve is ready to reduce its program of bond purchases aimed at stimulating the economy. Currently, the Fed makes purchases of bonds worth 85 billion dollars to lower long-term interest rates and stimulate spending. This program puts downward pressure on the dollar.

The dollar showed growth for the past month, as a steady stream of U.S. economic data has been steadily exceeded expectations. Ben Bernanke, the Fed chairman, said that if the situation in the U.S. economy would continue to get better, the central bank may begin to curtail the monthly bond purchases in the coming sessions. The next Fed meeting will be held on June 19.