Euro Drops As Middle East War Continues

(RTTNews) - The euro weakened against most major currencies in the European session on Friday, as investors remains cautious amid concerns about potential economic impact of the ongoing conflict in the Middle East.

The continued rise in crude prices amid an escalating conflict in the Middle East fueled inflation worries and reduced expectations of near-term Federal Reserve rate cuts.

Due to their reliance on Middle Eastern oil, in light of Russia's invasion of Ukraine, European nations are particularly vulnerable to this problem.

The majority of the gas used by the bloc is currently imported from Qatar and other Middle Eastern nations. Due to Iran's closure of the crucial Strait of Hormuz, many goods are no longer available.

Consumer inflation will therefore probably start to rise again, reversing the European Central Bank's (ECB) gains.

Traders await the upcoming European Central Bank interest rate decision, due next week.

In economic news, Eurozone industrial production declined for the second straight month in January, official data revealed Friday.

Industrial output posted a monthly fall of 1.5 percent in January, sharper than the 0.6 percent decrease seen in December, Eurostat said.

Within overall production, all components except energy declined in January. Non-durable consumer goods logged the biggest fall of 6.0 percent, followed by a 2.3 percent decrease in capital goods output.

On a yearly basis, industrial production dropped 1.2 percent, partially offsetting the 2.2 percent increase seen in December.

In the European trading today, the euro fell to an 8-day low of 182.30 against the yen, from an early high of 183.65. On the downside, 181.00 is seen as the next support level for the euro.

Against the U.S. and the Canadian dollars, the euro slipped to a 7-month low of 1.1433 and a 4-day low of 1.5621 from early highs of 1.1530 and 1.5706, respectively. If the euro extends its downtrend, it is likely to find support around 1.13 against the greenback and 1.55 against the loonie.

The euro dropped to a 1-week low of 0.9022 against the Swiss franc, from an early 1-week high of 0.9055. The next possible downside target for the euro is seen around the 0.88 region.

Meanwhile, the euro dropped to a 2-day low of 0.8651 against the pound, from an early high of 0.8620. If the pound extends its uptrend, it is likely to find resistance around the 0.87 region.

In economic news, the U.K. economy logged no growth in January, as growth in construction was offset by contraction in industry and flat services activity, the Office for National Statistics reported.

Gross domestic product remained flat after rising 0.1 percent in December and 0.2 percent in November. Economists had forecast a monthly growth of 0.2 percent.

On a yearly basis, the economy expanded 0.8 percent in January, slightly weaker than forecast of 0.9 percent.

Looking ahead, Canada jobs data for February, manufacturing sales data for January, U.S. core PCE price index, durable goods order, personal income and spending data, all for January, U.S. University of Michigan's consumer sentiment for March and U.S. Baker Hughes oil rig count data are slated for release in the New York session.