EUR/USD slips as faint hopes for budget impasse end emerge

EUR/USD slips as faint hopes for budget impasse end emerge

Investing.com The euro inched lower against the dollar in mid-session U.S. trading on Tuesday as hopes began to sprout that lawmakers will end a budget impasse that closed the government and threatened to derail efforts to lift the country's debt ceiling and avoid default.�

In U.S. trading on Tuesday, EUR/USD was down 0.01% at 1.3580, up from a session low of 1.3558 and off from a high of 1.3607.

The pair was likely to find support at 1.3543, Monday's low, and resistance at 1.3607, the earlier high.

A government shutdown dragged on Tuesday though hopes began to build that parties from both sides may be willing to return to the negotiating table to find a way to fund the government as well as lift the debt ceiling and avoid default.

The U.S. Treasury Department has estimated will that it will hit its borrowing limit by Oct. 17, after which the risk of default rises.�

Still, the dollar's recovery was weak, as both sides said the other must move first.

Senate Majority Leader Harry Reid said earlier that the Republican-controlled House should vote to end the shutdown and halt demands to amend President Barack Obama's 2010 healthcare reform bill.�

Separately, House Speaker John Boehner said Reid and the president should negotiate with him, though news that the president will not negotiate on spending until the House moves to end the shutdown and raise the debt ceiling prevented the greenback from fully recovering.

Even as the stalemate continued, hopes began to build that lawmakers will eventually take steps to avoid hitting the debt ceiling in the near future, which gave the greenback some support.�

IMF Chief Economist Olivier Blanchard said Tuesday that a prolonged failure to raise the U.S. debt ceiling would "almost certainly derail the recovery" and warned the U.S. to slow the pace of its deficit reduction program.

In its latest World Economic Outlook report, the IMF downgraded its forecasts for the global economy, saying it now expects growth of 2.9% this year, down from 3.1% in July. It expects growth of 3.6% in 2014, down from 3.8%.

The euro saw support after the IMF said it expected the euro zone economy to contract by 0.4% this year, less than 0.5% it forecast in July. It left its 2014 growth forecast unchanged at 1%.

Also Tuesday, data showed that German factory orders unexpectedly fell 0.3% in August following a 1.9% drop in July. Analysts had been expecting a gain of 1.2%.

Elsewhere, the euro was up against the pound and up against the yen, with EUR/GBP trading up 0.11% at 0.8446 and EUR/JPY trading up 0.15% at 131.51.

On Wednesday in the euro zone, Germany is to produce official data on industrial production, a leading indicator of economic health.