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Forex Market Update: Euro Steady against Dollar despite Weak German Ifo Reading

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In spite of unexpectedly weak German Ifo Index, which is a gauge in business sentiment, the euro remained steady against the US dollar after hitting to a two-week low in the previous session. Nonetheless, the euro is expected to remain vulnerable in coming days as currency strategists expect the European Central Bank (ECB) to slash benchmark interest rate, next month.

The euro was trading at $1.3002 during European trading hours, having fallen as low as $1.2973 following the release of dismal PMI data on Tuesday.

Already the policymakers from the ECB have hinted at more cuts in prime lending rate in case economic indicators warrant it. The benchmark rate in the euro zone is at record low level of 0.75%.

The weaker-than-expected German Ifo Index comes just a day after when Markit’s flash Composite PMI data showed that business activities in Europe’s largest economy contracted in April.

Commenting over possible rate cuts by the ECB, a trader for a Japanese Bank in Bangkok said to Reuters, “If the Ifo is weak that could provide further data-based validation for the recent speculation that there might be a rate cut in May”.

However, some strategists expect that euro might not fall as market participants have already factored in that the ECB could cut rates to boost lending.

“Markets have moved around to the view that the ECB will cut rates. We’re looking for a cut in May. So to some extent the euro is pricing that in,” said Mitul Kotecha, a Hong Kong-based head of global foreign exchange strategy for Credit Agricole, according to Reuters.

 

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edliston
Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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