Brought to you by
AIA
Save content
Have you found this content useful? Use the button above to save it to your profile.

Euro boosted by German business confidence

22nd Aug 2013
Brought to you by
AIA
Save content
Have you found this content useful? Use the button above to save it to your profile.

The Pound weakened a little against the Euro and US Dollar based on US and Eurozone data. The Eurozone news came in the form of sentiment and rumour. The sentiment was that of German businesses. The German Purchasing Managers Index rose to its highest level in two years at 52 in August, up from 50.7 in July. That was at odds with poor French data but as Germany is, seemingly, the sole growth area of Europe, the data was enough to lift the euro. The rumour and speculation surrounded suggestions that Greek debt will have to be written off but the comments themselves are being written off as politically motivated as they came from a German politician with a vested interest ahead of the 22nd September German elections. Nevertheless, the euro is a tad stronger this morning and Sterling has stepped back from its resistance levels.

The US data came late in the day as the Federal Reserve released the minutes from its last meeting. We didn't really learn anything new from them. It confirmed the fact that they will start to tail off their bod buying program later this year but there was no indication as to when that process might begin. It was clear though that there is no consensus on the strength of the US recovery and that is a worry. Nevertheless, the US Dollar has strengthened a little, bringing the Euro-Dollar exchange rate half a cent lower and bringing the Sterling - US Dollar rate down below $1.56 again.

The Federal Reserve's commitment to 'tapering' their requirements, as it has been dubbed, has s knock on effect as well into the Canadian Dollar which weakened to a fresh high against the Pound overnight.  There is a good chance Sterling's weakness today will bring the GBP-CAD exchange rate back down to 1.62 and perhaps lower in the short term but we will have to see if the infant gains the Pound has experienced recently can follow through into a proper grown up rally.

Overnight news showed China's manufacturing Purchasing managers Index rose to 50.1and that was not only a rise compared to the last two months but also well above expectations. This new was largely lost amongst the reports of ex politician Bo Xilai but it had a direct effect on the strength of the Australian and New Zealand Dollars, which both strengthened overnight. That took the Sterling - NZ and Sterling Aussie Dollar exchange rates down from yesterday's highs.

Today's data diary is a bit limp really so there is likely to be further consolidation in exchange rates. Nevertheless, after such a lively month and with so much politicking going on in Germany, anything is possible.
 

Article supplied by David Johnson, Director at Halo Financial - Currency Specialists

Want to learn more or have a question about foreign exchange? Get in touch by emailing us on [email protected] or calling our team on +44 (0)20 7350 5474

Tags: