Investors had been concerned that the European Central Bank’s “stress test” of Eurozone banks would reveal inadequacies with capital requirements however the tests found that the fewer banks than expected were experiencing any difficulties. The ECB reported that of the 25 banks which failed last year’s stress test, the majority had repaired their financial situation and that currently there is only about a €10 billion shortfall to be raised in capital.
As reported at 10:20 a.m. (GMT) in London, the EUR/USD was trading at $1.2682, up from Friday’s close but still nearer the lower end of the session’s trading range; earlier, the pair had briefly touched on $1.2711 during Asian trade as investors first got the positive news. Last week, the Euro had struck a 2-week trough against the dollar but continues to push up from that low of $1.2614. The EUR/JPY edged lower to 136.7111 Yen as investors look to safe haven currencies ahead of key central bank decisions this week.
Germany’s IFO Report Misses
The outcome of the stress tests did much to provide the Euro with a boost, even as traders awaited news on Germany’s business sentiment which is indicative of morale in the Eurozone’s largest economy. The IFO report was worse than economists had been predicting, with all three categories, i.e. expectations, business climate and current sentiment, falling short of expectations, however, the EUR/USD maintained positive momentum.