In the forex market today, the euro was weakened by a report suggesting financial experts have downgraded their assessments of the Germany economy.
By Peter Martin
Tuesday, August 12, 2014
The German-based research group ZEW reported that its Indicator of Economic Sentiment, a survey of how several hundred financial analysts view the economic outlook, fell for the eight consecutive month in August, dropping 18.5 points to a level of 8.6, its lowest level since December 2012 and the biggest monthly drop since June 2012.
The ZEW attributes the fall to the recent rise in geopolitical tensions and says ‘the signs are that economic growth in Germany will be weaker in 2014 than expected’. The ZEW also conducts the survey for the whole of the eurozone, and the Indicator of Economic Sentiment fell sharply for this area as well.
These results will add pressure on the European Central Bank, already burdened with concerns of too-low inflation alongside weak growth, to find additional means of stimulating economic activity. By early afternoon in New York, EUR/USD was down 0.17% at 1.3362, having reached a low of 1.3336 earlier in the session, just a few pips from the nine-month low set last week.
The US dollar has been having an overall good day, gaining ground on the Swiss franc, the Japanese yen and the Canadian dollar, after being boosted by news that job openings advanced in June. The Labor Department’s Job Openings and Labor Survey (JOLTS) was released today and showed job openings at the end of June at 4.671 million, up from May’s downwardly-revised 4.577 million. The rate of hiring also advanced in June, climbing to 4.830 million hires from the 4.738 million seen in May, while total separations remained broadly static. The combination of a slight rise in the number of job openings with the increased hires is suggestive of an upward curve in the jobs market, which will not go unnoticed by the Fed, even if it is unlikely to force their hand into altering the timing of monetary policy just yet.
There was further good news for the US economy in the form of the National Federation of Small Business’ Small Business Optimism Index, which rose to 95.7 for July from 95.0 in June, with gains in the components of ‘plans to increase employment’ and ‘plans to make capital outlays’.
Despite these modestly upbeat indications, the US stock market has retreated today, albeit only slightly. By early afternoon on Wall Street, the Dow Jones Industrial Average was roughly flat, slipping just 0.03% or 5 points to 16,565, while the broader S&P 500 index suffered a more significant drop of 0.22% or 4.3 points to 1932.6.
The US Treasury releases its federal budget report for July on Tuesday at 2.00pm ET. A deficit of $96 billion is expected.
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