Euro hits lowest level in fortnight as German data disappoints again
28/Oct/2014 • Currency Updates•
The Pound continued to strengthen against its two major peers on Monday, climbing by 0.1% on the single currency and by 0.25% on greenback. Weak data in the US allowed the UK currency to reach a six day high against the Dollar, while edging towards a two year high on the Euro.
The biggest announcement over the weekend was the European stress test results and while no UK banks failed the test, shares in Lloyds fell by 2.4% after the bank only narrowly passed the capital under adverse scenarios test, making it the biggest faller on the FTSE 100 yesterday. A survey released by the Confederation of British Industry came in better than expected at 31 on Monday morning. The index, which measures UK retail sales, showed no change on last month but was above economists’ estimates of 25.
This week is poised to be a relatively quiet one for the UK economy although mortgage approvals and consumer credit data for September will be released on Wednesday.
The single currency fell back towards its lowest level in two years against Sterling, falling by 0.1% during trading after further disappointing German data was released.
On Sunday the highly anticipated yearlong stress test conducted by the Committee of European Banking Supervisors (CEBS) yielded a better than expected result. The report, which assessed the health of 130 large Eurozone banks, showed that the majority of banks would be able to survive a financial crisis or economic downturn. Only 13 failed the health checks, down from 25 in 2013 including no major European banks in a result that was deemed “credible” by Vice President of the ECB, Vítor Constâncio, which to some extent helped the Euro.
The single currency was, however, brought back down to earth by lower than expected German confidence data released by CESifo Group. The Expectations Index for October fell to 98.3, down from 99.3 last month, while Business Climate and Current Assessment also fell to 103.2 and 108.4 respectively, both down on September and lower than anticipated. The Business Climate Index is now at its lowest level since December 2012 and the downward trend is firmly established.
Weak PMI figures caused the US Dollar Index to suffer somewhat yesterday as the Dollar fell by 0.1% against its major peers.
PMI data released by Markit Economics showed that business conditions in the US services industry fell to its lowest level since May of 57.3, below expectations of 58.0. The composite index, which provides a weighted reading of conditions within services and manufacturing, also fell on September to 57.4. Pending Home Sales also disappointed, down on expectations at 0.3% MoM, although up on last month’s -1% and improved YoY from -2.2% to 1.0% in September.
A couple of major announcements in the world’s largest economy today begin at 12:30pm with the release of the Durable Goods Orders for September. Stability is expected to return with a figure of around 0.6% predicted after the volatile readings of the last two months, that yielded a record high and a record low. Then at 2pm London time the Conference board will be announcing its consumer confidence data for October, with a slight increase on last month expected.
Rest of the world
The worst performing emerging currency of the year suffered another blow yesterday with the Brazilian Real dropping to a nine year low amid speculation that South America’s largest economy will remained stalled with inflation above target following the narrow re-election of President Rousseff for a second term. The currency dramatically decreased by 2.3% on the Dollar this morning, the largest drop since November 2011, and the greatest among all global currencies tracked by Bloomberg as well as falling against all of its 31 major peers.