News Column

Euro Slides As German Ifo Business Sentiment Slips Below Forecasts

August 25, 2014

BRUSSELS (Alliance News) - The European currency weakened against its key counterparts in the early European session on Monday, as German business sentiment weakened more-than-expected in August.

Data from the Ifo institute showed that Germany's business climate index fell to 106.3 in August. Economists had forecast the indicator to drop to 107 from July's initially estimated score of 108.

The current conditions index dropped to 111.1 from 112.9 in July. The expected score for August was 112. The economic expectations index came in at 101.7 in August, down from 103.4 in July. The index was expected to fall to 102.

The currency was under pressure after dovish comments from the European Cental Bank president Mario Draghi at the Jackson Hole Economic Symposium last week.

European Central Bank President Mario Draghi indicated that policymakers are prepared to roll out more monetary stimulus measures to counter deflationary risks and boost demand in the ailing eurozone economy.

The euro fell to nearly a 2-week low of 0.7957 against the pound and a 1-week low of 1.2086 against the Swiss franc, from early highs of 0.7978 and 1.2106, respectively. If the euro extends its downtrend, it is likley to find support around 0.78 against the pound and 1.207 against the franc.

The euro, which closed last week's deals at 1.3238 against the US dollar, dropped to nearly a 1-year low of 1.3183. This may be compared to an early high of 1.3207. The euro may test support near the 1.315 region.

Against the yen, the euro slipped to a 5-day low of 137.17 from an early high of 137.66. At last week's close, the euro was trading at 137.54 against the yen. Continuation of bearish trend may lead the euro to a support near the 136.64 mark.

Looking ahead, Markit's US composite PMI for August and U.S new home sales for July are due to be released in the New York session.

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Source: Alliance News

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