The Euro suffered only a modest loss against the U.S. Dollar thanks to a rebound after a hard fall which came after the release of a key economic report from Germany showed that business sentiment once again deteriorated, now for the 7th straight month. The German ZEW Survey, which measures economic sentiment, fell to 8.6 in August, a massive slide from July’s reading of 27.1 and far off analysts’ expectations of a drop to 18.2. The ZEW Survey for the European Union also fell sharply to 23.7 from 48.1. According to JP Morgan analysts in a client note, the large misses suggests that there is a further momentum loss resulting in yet another major disappointment; other analysts believe that the situation between Ukraine and Russia is also exacting a toll on economic sentiment.
The EUR/USD had nearly hit a 9-month low at $1.333 after the ZEW reading, before recovering to $1.3369 later; as at 12:26 p.m. (JST) in Tokyo, the pair was trading at $1.3365, a loss of only about 0.1%. The EUR/JPY hit a session low of 136.37 Yen before edging higher to 136.75.
Asia Draws Market Focus
Market focus had turned to Asia as 2nd quarter GDP from Japan showed a contraction on both a quarterly and annual basis; though slightly off analysts’ expectation, it is likely to increase expectations that the Bank of Japan will provide more stimulus which would further weaken the Japanese Yen. Retails sales and industrial production date from China could weigh on antipodean currencies like the Aussie and Kiwi Dollars; the Aussie Dollar gained some support on an improvement in the consumer confidence reading, with the AUD/USD pair trading higher at $0.9281.