News Column

Euro Extends Slide As German Economic Confidence Hits 20-month Low

August 12, 2014

CANBERA (Alliance News) - The euro continued its early decline against most major currencies on Tuesday's European session, as data showed that Germany's economic confidence weakened notably to the lowest since December 2012, due to the ongoing geopolitical tensions.

The survey results from the Mannheim-based Centre for European Economic Research/ZEW showed that German economic sentiment index fell by 18.5 points to 8.6 in August. This was the lowest score since December 2012, when the reading was 6.9. The expected score for August was 17.

At the same time, assessment of current economic situation declined in August, with the corresponding index falling to 44.3 from 61.8 in July. The reading was well below the expected level of 54.

Traders assess geopolitical developments as Russia send 280 trucks carrying humanitarian aid for Ukraine, despite warnings from the West that it should not be used as a pretext to invade eastern Ukraine.

Ukraine claimed that around Russian 45,000 troops have accumulated on its border. This follows warning by NATO Secretary General Anders Fogh Rasmussen that he saw a "high probability" that Russia could launch an invasion of Ukraine.

Iraq's president designated Haider al-Abadi as new Prime Minister to succeed Nouri al-Maliki, who raised confrontation for refusal of his bid for a third term. Maliki vowed to challenge President's decision before the Federal Court, alleging the violation of constitutional law.

The euro hit 0.7951 against the pound, a 4-day low, which may be compared to an early high of 0.7979. The euro is poised to challenge support around the 0.79 zone. The pair was worth 0.7971 when it ended deals yesterday.

Like-for-like sales in the UK were down 0.3% on year in July, the British Retail Consortium said.

That was well shy of forecasts for an increase of 0.9% following the 0.8% contraction in June.

The euro that closed Monday's trading at 1.3383 against the US dollar dropped to a 5-day low of 1.3338. The euro is likely to challenge support around the 1.33 mark.

Pulling away from an early high of 136.88 against the yen, the euro dropped to a 4-day low of 136.43. Further weakness may take the euro to a support around the 135.00 mark. The pair traded at 136.63 at yesterday's close.

Japan's industrial production declined more than initially estimated in June, final data from the Ministry of Economy, Trade and Industry showed.

Industrial output slid 3.4% month-on-month in June compared to the initial estimate of 3.3% decline.

The euro reversed from early high of 1.4462 against the aussie and declined to a 4-day low of 1.4399. If the euro extends slide, it may possibly find support around the 1.43 zone. At yesterday's close, the pair was worth 1.4446.

The single currency eased to 1.5827 against the NZ dollar, after having advanced to a new 2-month high of 1.5897 at 12:30 am ET. The next possible downside target for the euro is seen around the 1.57 mark.

The euro slipped to 1.4599 against the Canadian dollar, its lowest since August 8, and was down by 0.1% from yesterday's closing quote of 1.4616. Continuation of downtrend may take the euro to a support around the 1.45 zone.

Looking ahead, US monthly budget statement for July is due at 2:00 pm ET.

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Source: Alliance News

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