As the accepted alternative to the US dollar, the euro naturally benefited from today’s dollar breakdown. However, the currency was finding strength on its own terms as well. From the economic docket, a round of data offered a mixed view of short-term fundamentals.
German factory activity through July expectedly contracted 0.9 percent; but a positive revision for the previous month also established the first, two-month period of expansion for this battered sector since the start of 2008. Far more conducive to the bullish trajectory the currency would take though was the German trade number. The largest exporter in the world by recent accounts, the 13.9 billion euro, nine-month high physical trade surplus establishes a critical source of growth and demand. Moving from the neat confines of the economic calendar, the region seems to be retaining its leadership role in the global recovery. ECB council member Axel Weber took the line other policy officials have laid out by saying in a statement today that current rates are “appropriate” and that positive growth may be protracted. Yet, he further mentioned that he sees no threat of credit problems in the Euro region and that it would be wise to act upon inflation pressures before they emerge. Subtle musings from an avowed hawk.
