FRANKFURT: The euro exchange rate weakened on Tuesday after a disappointing economic report from Germany, with the common currency losing about half a cent against the US dollar, reported German news agency dpa.
The renewed deterioration in sentiment in the German economy weighed on the euro. The Ifo business climate index fell in July for the third month in a row. The decline was also sharper than expected.
“After the third decline in a row, the Ifo business climate is pointing just as clearly downwards as the other leading indicators,” commented Commerzbank chief economist Jörg Krämer.
“Even if German GDP [gross national product] should have risen somewhat in the second quarter, the broad-based decline in leading indicators points to a renewed contraction of the German economy in the second half of the year.”
In the United States, consumer confidence also brightened more than expected in July. Indicators of current conditions and expectations improved, and the US dollar benefited from the data.
Markets are waiting for monetary policy decisions from the US Fed on Wednesday and the ECB on Thursday. Both central banks are expected to raise interest rates by 0.25 percentage points. However, it remains to be seen what will happen afterwards.
According to Krämer, the latest Ifo data should strengthen the position of the members of the European Central Bank who are against further interest rate hikes after Thursday’s meeting. — BERNAMA-dpa
