Euro: France versus Germany

[DailyFx]

The Euro strengthened against the US dollar thanks to stronger economic data from France. Even though the near term fate of the EUR/USD will be largely dependent upon the outcome of the FOMC rate decision tomorrow, it is worth noting there is a growing divergence between economic growth in the Eurozone’s two largest member countries.


Over the past few weeks, we have had a number of disappointments from Germany including a sharp drop in business confidence and weak retail sales. France on the other hand seems to be chugging along. Consumer spending rose 2 percent last month, more than double the market’s expectations. This has helped to keep business confidence steady even though analysts expect it to fall in the coming months. German and Italian consumer confidence on the other hand did not fare as well. That is probably why ECB member Orphanides was the latest central bank official to say that the market’s expectations for a July rate hike is appropriate but anything beyond July is up in the air. Meanwhile despite a sharp drop in the UBS consumption index, the Swiss Franc has strengthened against the Japanese Yen and Euro.