Forex - Euro little changed vs. dollar in subdued trade

The euro was little changed against the dollar on Wednesday after official data showed that U.S. producer price inflation slowed in July and a report earlier in the day showing that the euro zone economy returned to growth in the second quarter.

EUR/USD hit 1.3239 during U.S. morning trade, the session low; the pair subsequently consolidated at 1.3258, dipping 0.03%.

The pair was likely to find support at 1.3200 and resistance at 1.3316, Tuesday’s high.

The euro eased back from session lows after the Department of Labor said U.S. producer prices were flat last month, confounding expectations for a 0.3% increase, after rising 0.8% in June.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The dollar continued to be supported by the view that the economic recovery is strong enough for the Federal Reserve to begin phasing out its USD85 billion-a-month asset purchase program later this year.

The euro briefly touched session highs earlier after data showed that the euro zone’s economy emerged from an 18-month recession in the three months to June.

Eurostat said the bloc’s economy expanded by 0.3%, the fastest quarterly expansion since the first quarter of 2011. Economists had expected quarter-on-quarter growth of 0.2%. 

France’s economy expanded 0.5% in the three months to June, following two consecutive quarters of contraction, while Germany’s economy expanded by a larger than forecast 0.7%.

Elsewhere, the single currency was lower against the broadly stronger pound, with EUR/GBP down 0.51% 0.8540.

Sterling was boosted after Bank of England minutes showed that policymakers were divided on forward guidance and a separate report showed that the U.K. unemployment rate was unchanged in June. 

The Office of National Statistics said the U.K. unemployment rate remained unchanged at 7.8% in June, in line with expectations. The number of people claiming unemployment benefits fell by 29,200 in July, better than expectations for a decline of 15,000.

Separately, the minutes of the BoE’s July meeting showed that the decision to provide forward guidance on future rate increases was not unanimous.

Monetary Policy Committee member Martin Weale wanted tougher measures to ensure that the pledge to hold rates at record lows did not lead to a pickup in inflation, but said he accepted the principles of forward guidance.

The minutes showed that policymakers voted unanimously in favor of keeping the bank rate steady at 0.5% and the asset purchase program unchanged at GBP375 billion.

The euro was also lower against the yen, with EUR/JPY slipping 0.09% to 130.12.