The euro made a recently-rare appearance at the bottom of our one-day performance table on Tuesday as investors began to note the German political concerns we first highlighted here yesterday. EUR/USD opened in Sydney in the low 1.24’s but it was a one-way street all the way down to a low around lunchtime in Europe of 1.2325; the lowest since Wednesday last week. The EUR has failed to rally overnight and is now nervously eyeing support from the spike low after US CPI around 1.2285.
In economic news, the ZEW survey of the current economic situation in the eurozone’s largest economy slipped more than expected this month to 92.3, although the latest assessment of Germany’s performance is still the second-highest reading on record. The ZEW indicator is compiled from a survey of banks, insurance companies and in-house finance teams who are asked about their assessments and forecasts for interest rates, stock markets and exchange rates across a clutch of major global economies. It is obviously more prone to influence from short-term market developments and the fall in stock prices during the survey period may well explain much of this month’s decline.
In a very hard-hitting article for Handelsblatt, former ECB Executive Board Member Jurgen Stark writes that, “the ECB’s policy interest rate has lost its steering and signaling functions. Another is that risks are no longer appropriately priced, leading to the misallocation of resources and zombification of banks and companies, which has delayed deleveraging. Yet another is that bond markets are completely distorted, and fiscal consolidation in highly indebted countries has been postponed. So, the benefits of the ECB’s policy are questionable, and its costs indisputable. The current ECB policy is thus simply irresponsible, as is the utter lack of any plan for changing it”. For today, the so-called ‘flash PMI’s’ for services and manufacturing are published for France, Germany and the Eurozone. The EUR opens in London this morning in the low USD1.23’s and GBP/EUR1.13.