Although dollar strength is the primary reason why the Euro is trading close to a 2 week low, it is starting to become very hard for Euro traders to escape the reality that the Eurozone economy is deteriorating.
Eurozone industrial new orders plunged three times more than the market expected in the month of May as the strong euro and weak domestic demand makes life difficult for Eurozone manufacturers. Retail sales in France and Italy were also weaker than expected, which indicates that conditions there are not much better. As a result, we expect tomorrow’s German IFO report to be weak as these factors continue to weigh on German business confidence. The ECB’s commitment to fighting inflation will come back to haunt them as the economy continues to slow. According to ECB member Liebscher, the central bank is not worried. He said that growth will weaken but remain fairly healthy. In 2010 there should be a slight uptrend, which for many currency traders is the same as an eternity. Service and manufacturing PMI for the month of July will also be released tomorrow along with the current account figures for May.
