Euro Advances Against US Dollar as German Business Conditions Remain Strong

The euro advanced against the US dollar on Friday in the wake of a fresh reading for business conditions in Germany, which revealed improved expectations over the short term. The shared currency also benefited from German gross domestic product data that was released early morning today and showed numbers that matched estimates.

The ifo Institute, which conducts monthly surveys to measure German business conditions, said in a report earlier today that the business climate index dropped to 115.9 in August. The reading was marginally lower than 116.0 in July, but beat estimates of a drop to 115.5, as sentiment among German businesses remained strong.

Companies that participated in the survey reported improved business outlook over the short term, which lifted the expectations index from 107.3 last month to 107.9 this month. Firms expected better business conditions as the economic growth in Germany appeared to be on the right track.

Current business conditions were viewed as less favorable in August than July to drop from 125.5 to 124.6, which weighed on the overall reading for business conditions. Manufacturers and wholesale companies had less satisfied views of current conditions than they did a month ago, while expectations for the near future grew stronger.

Retailers were the only subgroup that had a lower business outlook this month than last month, which reflected the bigger drop in their assessment of current conditions. Construction, on the other hand, continued its record run as contractors had improved assessments for current and near future business environment.

The German economy enjoyed solid growth in recent months, as reported earlier today by Destatis, the nation’s official statistical office. German gross domestic product grew 0.6% in the second quarter of 2017 from the previous quarter, while on a yearly basis it increased 0.8%. The quarterly growth had the second highest rate since the first half of 2016.

EUR/USD rose to 1.1862 as of 14:35 GMT on Friday from 1.1865 at 14:25 GMT, the pair’s highest level since August 4. EUR/USD began trading today at 1.1793.

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