News Column

Euro Falls As Eurozone Economic Sentiment Index Worsens

August 28, 2014



CANBERA (Alliance News) - The euro fell against its major rivals in European deals on Thursday, as Eurozone economic confidence weakened more-than-expected in August, raising concerns over region's recovery.

The economic confidence index fell to 100.6 in August from 102.1 in July, the European Commission said. The indicator was forecast to drop moderately to 101.5.

Worsened sentiment resulted from deterioration in retail trade, consumer, industry and services confidence, it said.

The consumer confidence index slid to -10 from -8.4 in July.

Adding to woes, Germany's unemployment increased unexpectedly in August, with the number of jobless people climbing by a seasonally adjusted 2,000 to 2.901 million in August

Economists had expected a decline of 5,000 after decreasing 12,000 in July.

Traders await inflation data from the Eurozone, due tomorrow, for further clues about the European Central Bank's monetary policy.

The inflation is expected to slip to 0.3% in August from 0.4% last month, far below the ECB's target of 2%. Markets are not expecting any imminent action on further monetary easing at the central bank meeting next week, as it had loosened its monetary policy significantly in June.

The euro had been under pressure since the ECB President Mario Draghi at his Jackson Hole speech indicated the possibility for the quantitative easing program, if inflation outlook worsens further.

After advancing to near a 1-year high of 1.3220 against the US dollar, the euro reversed direction and fell to 1.3170. If the euro continues its downtrend, 1.31 is possibly seen as its next support level.

The euro, which advanced to a 2-day high of 0.7966 against the Sterling earlier, fell to 0.7943 after the data. Next key support for the euro lies around the 0.79 region.

The euro hit 1.2051 against the franc, a level not seen since December 2012. If the euro continues its slide, its may test support around the 1.20 zone.

Having climbed to 137.21 against the yen at 3:05 am ET, the euro declined to a new 2-week low of 136.41. Further weakness may lead the euro to a support around the 135.00 region.

The euro fell to a 3-day low of 1.5709 against the NZ dollar and near a 10-month low of 1.4079 against the aussie, off early highs of 1.5770 and 1.4145, respectively. Further weakness may take the euro to support levels of around 1.40 against the aussie and 1.56 against the kiwi.

The euro eased to 1.4307 against the loonie, coming off from an early high of 1.4348. The euro is likely to target support around the 1.42 level.

Looking ahead, German preliminary CPI for August is due at 8:00 am ET.

The US GDP data for the second quarter, pending home sales for July and weekly jobless claims for the week ended August 23, as well as Canada current account data for the second quarter are set for release in the New York session.



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Source: Alliance News


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