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Flash: Euro remains supportive against USD - BTMU

FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the euro has remained relatively stable against the US dollar over the past week deriving support from tentative signs that the pace of economic recession in the euro-zone is easing.

He sees that the release of the euro-zone PMI surveys yesterday revealed that business confidence in both the manufacturing and service industries improved modestly, but still the overall levels in Q2 so far were consistent with the euro-zone economy contracting by a similar pace to in Q1 by around -0.3%. Elsewhere he adds that Markit noted that it’s looking more like the end of the year until the euro-zone economy is likely to return to stabilization. The breakdown of the German GDP report for Q1 which revealed a much larger than expected increase in private consumption by 0.8% may also have provided some encouragement that strengthening domestic demand in Germany can support economic recovery in the euro-zone.

He continues to add that tentative signs of economic improvement may at the margin reduce expectations that the ECB will deliver another refi rate cut at their upcoming meetings supporting the euro in the near-term. In contrast the release of the breakdown of Q1 GDP from the UK yesterday was much less favourable. He writes, “The report revealed that the main driver of growth was inventories which added 0.4 percentage points to growth while consumption growth was much weaker than expected growing by just 0.1%. The unfavourable breakdown increases the risk that GDP growth in Q2 will disappoint the BoE’s expectation of 0.5% weighing upon the pound.”

Germany: IFO – Business Climate improves to 105.7 in May

According to data published on Friday by the CESifo Group, German IFO – Business Climate increased from 104.4 in April to 105.7 in May. Market consensus pointed less growth to 104.5.
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