Euro Strong Ahead Of Manufacturing Data
The euro strengthened on Tuesday as investors looked to Germany's central bank for clues about the European Central Bank's next move regarding monetary policy. The common currency neared a weekly high overnight and traded at $1.3332 on Tuesday morning.
Businessweek reported that the Bundesbank put out a monthly report on Monday which indicated that the ECB's commitment to leaving interest rates low for the foreseeable future isn't set in stone.
The Bundesbank said the ECB's forward guidance would not overpower inflation pressure. The statement caused many to speculate that the ECB will raise rates over the course of the next year.
Traders are also anticipating manufacturing and services data which is due out on August 22. The index is likely to show that the eurozone as a whole maintained its reading above the 50 point benchmark which indicates expansion. Separate data for each individual eurozone nation is seen as being mostly positive, with Germany leading the pack. Estimates show the German manufacturing sector will have risen to 51.1 in August from 50.7 in July and the services sector will have climbed from 51.3 to 51.7.
Gains to the euro were mitigated by a 2.90 percent rise in US 10-year Treasury yields on Monday which helped boost the dollar. Investors are waiting for the release of meeting minutes from the US Federal Reserve's most recent policy meeting for clues about the bank's timeline for cutting back on its stimulus spending. Most are expecting to see a drawback of the $85 billion per month bond buying plan as early as September.
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