Euro Unphased By Poor German Data
The euro was steady at $1.3608 at 5:47 GMT on Wednesday morning despite further data from the region which indicated that the economy was struggling. Instead, the common currency found momentum from a testimony by Bank of England chief Mark Carney on Tuesday.
Carney told UK lawmakers that the Bank of England believes that the UK's economy is not being used at full capacity. His comments quashed expectations of a rate hike any time soon, thus knocking the pound down 0.3 percent and opening the door for the euro to climb.
The euro traded higher despite disappointing results from Germany's Ifo business climate survey, released on Tuesday. Reuters reported that the nation's business climate index dropped to 109.7 in June from 110.4 in May, and fell below analysts' forecasts of a 110.2 reading. The survey came on the heels of German PMI data which also did not meet expectations, causing many to worry that the bloc's powerhouse economy was running out of gas.
Related Link: Eurozone PMI Confirms Patchy Recovery
The Ifo survey indicated that many German companies see the ongoing geopolitical tension in Ukraine and Iraq as problematic for their operations.
In Ukraine, Russia's involvement has led to economic sanctions on Moscow, which is bad for the 6,000 German companies whose profits are tied to activity in Russia.
On Monday, the EU threatened to enact further sanctions on Russia if President Vladimir Putin doesn't get behind Ukrainian President Petro Poroshenko's peace plan and help end the nation's conflict. However, Moscow has been urging Poroshenko to hold talks with the pro-Russian separatists in an effort to resolve the underlying issues diplomatically.
Germany's survey is likely to ramp up pressure on the European Central Bank as it prepares to reconvene next week for it's July policy meeting. The central bank's board members have asked for patience as the easing package it released in May takes effect.
The bank cut its interest rates to new record lows and took its deposit rate below zero and also introduced targeted loans aimed at increasing lending to the region's small and mid-sized companies. The bank has said it will take time to see the effects of these changes, with the loans not expected to be offered until September, but since German firms struggling due to high oil prices and worries about the effects of sanctions on their profits, the ECB's easing package may not help.
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