EUR/USD Increases
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For today's update see Spread Bets Daily FX News.
The Daily FX Update from Boris Schlossberg, Director of Currency Research, GFT.
FX Spread Betting 27 Jan 09
EUR / USD Increases
The IFO survey of business climate surprised to the upside printing at 83 versus 81 forecast while the current assessment component also beat expectations coming in at 86.8 versus 85 projected. Although the current assessment reading was actually worse than the month prior, reflecting the deteriorating conditions in the manufacturing sector, the overall IFO report suggested that at least for the time being sentiment amongst European business leader appears to have stabilized.
One key variable that tends to correlate well with the IFO readings is the price of oil and recent declines in energy costs contributed significantly to savings on the supply side serving as a positive offset to the persistently dour conditions on the demand side.
The better than forecast numbers from IFO along with improvements in sentiment readings from Italy and Netherlands have sparked hope amongst euro bulls that the region may be seeing the start of a bottoming out process. We believe such sentiments are premature, as the fallout from the credit crisis is likely to continue for the better part of this year. Nevertheless, today’s positive IFO surprise along with yesterday’s better than expected US LEI readings have greatly improved investor sentiment across the globe triggering a broad rally in euro, pound and Aussie, as the theme of the night is – risk is back.
The EUR/USD climbed above $1.3300 on the news with $1.3384 serving as the next area of resistance. However, with the unit having come so far so fast in the past 48 hours some pause may be due. Risk attitudes will continue to determine the near term direction of the pair and if US equity markets fail to follow through on the gains in Asia and Europe, the EUR/USD rally may fizzle. On the other hand if today’s price action in US equities proves positive the $1.3400 level could be taken out by day’s end.
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"EUR/USD Increases" last update by B. Schlossberg, 27-Jan-2009
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