The Euro has strengthened across the board this morning due to a higher than expected business confidence figure from Germany. The survey is conducted monthly, querying German firms on the current German business climate as well as their expectations for the next six months. As the largest economy in the Euro-zone, Germany is responsible for approximately a quarter of the total Euro-Zone GDP. Consequently, the German IFO is a significant economic health indicator for the Euro-zone as a whole.
The figure posted at 106.8 versus an expected 106.6, so marginally better but enough to send the Euro half a point higher against the pound and half a point higher against the Dollar.
There is market talk that the Euro zone is still in trouble, the German economy is still franticly pumping currency into the economy to save the Greek, Irish, Spanish and Italian economies to stay above water. There is a sense that this is unsustainable.
“I’m still bearish on the euro. The fiscal problems are going to resurface next year and growth is going to slow,” said Vassili Serebriakov, a currency strategist with Wells Fargo in New York. “The euro will eventually go back to the lows of June and even below that. It’s just a question of time.”
The Dollar remained under pressure after the U.S. Federal Reserve signaled last Tuesday that it was ready to take more Quant easing measures, prompting market players to expect a move at its next scheduled meeting in November.
The pound is still gaining ground against the dollar but will need to recapture the 1.6 level for the bulls to really start buying again and this looks less than likely without some other fundamental shift.
The Australian and New Zealand dollars jumped last night against most currencies as the expectation that interest rates will again rise over there in the near term, Deutsche bank have predicted that Australia will raise their interest rates twice before the end of the year.