Euro Rallies on Positive Data, Remains Vulnerable Ahead of ECB

The euro rallied against most major currencies today. Some analysts attributed the rally to reports that Germany plans to stimulate its economies. Others pointed at today’s positive data as the main catalysts of the euro’s advance. The rally may be short-lived, though, as most market participants are not bullish on the euro ahead of this week’s European Central Bank monetary policy meeting.
Destatis reported that the German trade balance surplus widened to â‚¬20.2 billion in July from €18.0 billion in June, while economists were expecting a much smaller increase to â‚¬18.8 billion. Exports increased and imports fell, both on a monthly and annual basis.
The Sentix economic confidence index for the eurozone improved from -13.7 in August to -11.1 in September. The report was not optimistic, though, saying:

The economic situation in Euroland remains tense.

It elaborated further:

Look at the situation values, which have slipped even deeper into the red, shows that the Euro zone is not far from a recession. In Germany, on the other hand, it must now be assumed that the economy will no longer grow.

The ECB will make its monetary policy announcement on Thursday. Specialists expect some form of stimulus from the central bank, and what kind of stimulus and how strong it will be will likely have a tremendous impact on the euro.
EUR/USD gained from 1.1026 to 1.1060 as of 16:28 GMT today. EUR/JPY rallied from 117.74 to 118.42. EUR/CHF jumped from 1.0888 to 1.0957.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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