Daily Currency Briefing: No euphoria after European data

iNVEZZ.com July 25, 2013

**EUR/USD**
German business moral, measured by the Ifo business climate based on a survey of some 7,000 firms, rose slightly yesterday to 106.2 in July compared to 105.9 in June, edging up for a third straight month in a sign Europe`s largest economy is picking up. The German economy has obviously started to build a head of steam, thanks to the export sector and consumers staring to gain more confidence. Export-oriented Germany avoided a recession at the start of 2013 when the global outlook worsened, weighing traditionally on demand for German products and willingness to invest. Data has clearly shown Germany is beginning to show signs of cautious recovery.

So, why were the developments in connection with the Ifo business sentiment today similar to the developments of the PMIs for the industrial sector on Wednesday? Probably because, even though sentiment has improved, it was not enough to provoke euphoria regarding the economic outlook in the Eurozone. The single currency has not been able to break above 1.3250, for now.

From the other side of the Atlantic, a large increase in aircraft bookings during June boosted orders for new U.S. durable goods by 4.2%, the third straight large monthly gain. Additionally, the number of people who have applied for new unemployment benefits showed a modest increase last week, moving up by 7,000 to a seasonally adjusted 343,000 in the week ended July 20. However, the average new claims over the past month, which is considered to be a more reliable gauge than the volatile weekly number, dropped by 1,250, marking the lowest level since mid-May. The dollar showed little reaction to both sets of data.

**GBP/USD**
The British pound fell today after the 2Q 2013 U.K. economic growth picked up, according to data released in the morning, with GDP preliminarily increasing 0.6% compared to 1Q 2013 and 1.4% higher than a year ago. This was in line with expectations but disappointed some in the market who had positioned for a better reading. Figures are still well below the pre-crisis peaks but the latest data was the strongest performance in more than two years and better than Germany` s figures, widely viewed as Europe` s powerhouse. Traders who love the pair are also said to have refrained from buying sterling in anticipation of the Bank of England meeting and inflation report next month as they expect some policy guidance or hints, which could weigh on the pound.

**Economic calendar for July 26**
**German Import prices for June**
The report is expected to show increase in the prices of goods purchased by importers with 0.4%. The data, scheduled for 1:00 GMT, usually have a low to medium impact on the single currency.
**Revised University of Michigan Consumer Sentiment for July**
!m[](/uploads/story/4351/thumbs/general_1_inline.png)The report is scheduled for 14:55 GMT and represents a survey of consumer sentiment towards general business conditions and economic health. The consensus forecast shows 84.0 in July compared with last month release of 83.9. This economic indicator is closely watched as it gives insight into the general health of the economy with declining consumer confidence levels usually followed by drops in consumer spending. Contrary to the news coming from the Eurozone where no sign for a forthcoming end of the expansionary monetary policy, any optimism spreading over markets regarding the approaching tapering of the stimulus would influence and even convince them the dollar would rise. So, watch closely.
**Revised University of Michigan Inflation Expectations for July**
This report measures the inflation of goods and services consumers are expecting over the next 12 months.