Investing.com - The euro slumped against the dollar on Monday after an upbeat report on U.S. consumer spending sparked healthy demand for the greenback.
In U.S. trading, EUR/USD was trading at 1.3771, down 0.22%, up from a session low of 1.3747 and off a high of 1.3793.
The pair was likely to find support at 1.3643, Thursday''s low, and resistance at 1.3824, Friday''s high.
The Commerce Department reported earlier that personal spending rose 0.4% in January, above expectations for an increase of 0.1%. Personal spending for December was revised down to a 0.1% gain from a previously reported increase of 0.4%.
The report added that personal income rose 0.3%, beating expectations for a 0.2% increase, after a flat reading in December.
Meanwhile, the core PCE price index inched up by a seasonally adjusted 0.1% in January, in line with expectations, after rising 0.1% in December.
The core PCE price index rose at an annualized rate of 1.2%, above forecasts for a 1.1% increase, after rising at a rate of 1.1% in December.
Consumer spending is the single biggest source of U.S. economic growth, accounting for as much as two-thirds of economic activity.
The Federal Reserve pays close attention to personal income and spending when deciding the fate of monetary policy, and Monday''s data prompted investors to assume the U.S. central bank will continue scaling back its monthly asset purchases as the year progress.
Fed asset purchases, currently set at $65 billion a month in Treasury and mortgage debt, aim to spur recovery by suppressing long-term borrowing costs, which weakens the dollar as a side effect by sending investors to stocks in hopes investing and hiring accompany rising equity prices.
The dollar also saw support after the Institute for Supply Management revealed that its manufacturing purchasing managers’ index rose to 53.2 last month from 51.3 in January, beating forecasts for a reading of 52.0.
The report attributed the rise to an increase in new orders after rough winter weather disrupted commerce at the start of the year.
The euro, meanwhile, came under pressure as escalating tensions over the crisis in the Ukraine sparked a broad-based selloff in risk assets.
Russian President Vladimir Putin over the weekend sent troops into the Crimea region.
The move sparked fears that the West will impose sanctions on Russia. Russia’s central bank hiked interest rates from 5.5% to 7% on Monday after the rouble fell to new record lows against the euro and dollar.
In the euro zone, data on Monday confirmed that the region’s manufacturing purchasing managers’ index declined to 53.2 in February from 54.0 in January. It was the first dip in five months, highlighting the fragile nature of the recovery in the euro area.
The rate of decline in France’s manufacturing sector eased in February, while activity in Germany’s manufacturing sector rose for the eighth straight month.
The euro was down against the pound, with EUR/GBP dipping 0.12% to 0.8234, and down against the yen, with EUR/JPY sliding 0.66% and trading at 139.55.
On Tuesday in the euro zone, Spain is to release data on the change in the number of people unemployed.