HomeContributorsFundamental AnalysisEuro Falls on Fears of Cooling German Economy; Dollar Rallies Across Board

Euro Falls on Fears of Cooling German Economy; Dollar Rallies Across Board

The dollar continued strengthening against most majors during the European session as geopolitical tensions have been out of the spotlight and the euro and sterling weakened, with the latter ignoring upbeat industrial data. Oil prices continued gaining ahead of an oil inventories report by the API.

The euro lost ground and fell below the $1.1175 level following a disappointing set of data out of Germany that got investors worried over the eurozone’s largest economy. The ZEW economic sentiment index, which gauges the six-month economic outlook, deteriorated sharply in August, falling for the third consecutive month. At 10, the index came in well below the expected 15 and the reading of 17.5 in July. Weaker exports and the ongoing scandals in the auto industry dragged the index lower. However, the report also showed that surveyed companies find current economic conditions to be better than expected. The reading pertaining to current conditions for August stood at 86.7 against expectations of 85.5 and the 86.4 seen in July. This has eased pressure on the euro. Euro/dollar was last trading at 1.1759.

The pound had a difficult trading day as the British currency fell despite the upbeat set of data from the Confederation of British Industry that showed better than anticipated expectations of manufacturing executives. At 13, the industrial orders index came in above the expected reading of 9 and above the prior month’s figure of 10. The pound weakened against the dollar to trade at $1.2833 ahead of the US open, its lowest since mid-July.

In the wake of no new bad news that could worsen political tensions in Washington DC, the greenback got a breather and rallied against most majors. The dollar index was up 0.40% ahead of US trading.

The loonie rose following the release of Canadian retail sales in June. While total retail sales came in below expectations, the Canadian dollar found support in upbeat core retail sales. Economists had predicted a 0.3% advance in total retail trade, but the Statistics Canada figures showed a monthly gain of only 0.1%. This is a slowdown from the downwardly revised reading for the prior month of 0.5% (instead of the originally reported 0.6%). Sales of gas and autos dragged down the overall figure. However, core retail sales gained 0.7%, above the expected 0.3% and the 0.1% decline in the prior month. Dollar/loonie tumbled to last trade at 1.2528, down from 1.2573 prior to the data release.

Oil prices continued gaining during European trading hours ahead of the American Petroleum Institute report on the latest crude oil and gas inventories. WTI was last trading at $47.95 a barrel and Brent was at $52.08.

Gold prices remained under pressure during the European session. The precious metal was last trading at $1,287.98 an ounce.

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