The euro held steady at 1.4660-1.4680 during the overnight session, holding onto recent gains amid mounting growth concerns for Germany. The German IFO business confidence index slipped to a three year low, which only suggests that economic activity may remain subdued for the rest of the year.
[B][U]Talking Points[/U]
• Japanese Yen: Consolidates Gains, But Holds at 106.20
• Pound: Breaks Above 1.8550
• Euro: German IFO Slips to Three Year Low
• US Dollar: Paulson, Bernanke Testify Before House Panel
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German IFO Disappoints, Euro Holds Steady at 1.46[/U][/B]
The euro held steady at 1.4660-1.4680 during the overnight session, holding onto recent gains amid mounting growth concerns for Germany. The German IFO business confidence index slipped to a three year low, which only suggests that economic activity may remain subdued for the rest of the year.
Business confidence in Germany slipped to 92.9 from 94.8, while business expectations fell to 86.5 from 87.0 in August. Weakened sentiment pair with a dour outlook suggests that economic activity may falter throughout the rest of the year, and may led Europe’s largest economy to slip into a recession as growth prospects dissipate. Furthermore, IFO economist Nerb stated that ‘the time has come to lower interest rates’ as economic activity continues to weaken throughout the Euro-Zone, and noted that ‘the third quarter is relatively weak… (and) we don’t see a silver lining in the fourth quarter.’ Growth concerns have certainly amplified over the previous month, which suggests that the ECB may be pressured to lower the benchmark interest ahead of schedule.
Meanwhile, the Japanese yen strengthened after hitting an intraday low of 108.02 against the greenback yesterday, and may pickup additional gains today as the U.S. Congress continues their overview of the $700B bailout plan proposed by the Treasury. Mounting uncertainties in the world’s largest economy has lower risk sentiments, which has benefitted the low-yielding currency, and the lack of accord among government officials suggest that they are far from reaching an agreement.
Fed Chairman Ben Bernanke is scheduled to testify before the U.S. Congress Joint Economic Committee at 10:00 a.m. EST to discuss the current situation of the global and domestic economy. Meanwhile, later at 2:30 p.m. EST, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are scheduled to bear witness in front of the House Panel on the current developments of the financial crisis and the $700B rescue plan. Following yesterday’s testimony before the Senate Committee, the duo will be in the spotlight once again to face further scrutiny about their contingency plan, and the commentary and outcome following the testimony could spark volatility in the markets as the whole world waits for further clues to how regulators will respond to the recent turmoil in the financial sector.
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