BLBG:Euro Rebounds on German Growth Amid Greece Speculation
The euro rose from the lowest level in almost four months against the dollar on better-than- estimated German growth that helped the 17-nation bloc avoid a second recession in three years.
The shared currency also advanced from a three-month low against the yen after Luxembourg’s Prime Minister Jean-Claude Juncker signaled Greece may get extra time to meet budget- cutting targets, as long as the country forms a government committed to austerity. Australia’s dollar rose from an almost five-month low as a technical indicator suggested it had fallen too far.
“The positive surprise in German GDP has caused a squeeze higher in the euro,” said Paul Robson, a senior foreign- exchange strategist at Royal Bank of Scotland Group Plc in London. “The outlook remains weak and the political uncertainty is high. We think the euro will continue to weaken.”
The euro advanced 0.3 percent to $1.2859 at 6:35 a.m. New York time. It earlier slid to $1.2814, the lowest level since Jan. 18. The shared currency gained 0.4 percent to 102.78 yen, after touching 102.23 yesterday, the lowest since Feb. 16. The yen was little changed at 79.92 per dollar.
Gross domestic product in the 17-nation euro region stagnated in the first quarter compared with the prior three months, the European Union’s statistics office in Luxembourg said today. The median forecast of economists surveyed by Bloomberg was for a 0.2 percent decline.
Financial Turmoil
Germany’s 0.5 percent expansion at five times the pace economists had estimated helped offset weaker GDP in the euro area’s peripheral economies. Europe’s financial turmoil has already pushed eight euro-region countries into recession, commonly defined as two consecutive quarters of contraction.
The Stoxx Europe 600 Index rose 0.1 percent and German 10- year bunds fell for the first time in three days.
“Today’s data underlines the divergence across the euro- region, which you could argue is negative for the euro,” said Chris Walker, a currency strategist at UBS AG in London. “We expect the euro to grind lower.”
The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict German economic developments six months in advance, slid to 10.8 from 23.4 in April. Economists forecast a drop to 19, according to a Bloomberg News survey.
Greece’s President Karolos Papoulias will attempt to persuade divided party leaders today to accept his proposal for a so-called technocratic government to avert new elections as concern mounts that the nation faces an exit from the euro area.
‘More Time’
“The Greek creditors may be willing to give Greece more time to deliver on fiscal austerity measures if Athens succeeds in forming a working government,” Valentin Marinov, head of European and Group-of-10 currency strategy at Citigroup Inc. in London, wrote in a note to investors today. “Some progress on the Greek political stalemate could help the euro and risk- correlated currencies.”
Europe’s shared currency dropped 3.8 percent in the past six months, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.8 percent, and the yen lost 2.3 percent.
The Dollar Index snapped 11 days of gains. Intercontinental Exchange Inc’s gauge, which tracks the greenback against the currencies of six major U.S. trading partners, declined 0.2 percent to 80.568. It reached 80.739 earlier, the most since Jan. 18.
U.S. Economy
The Federal Reserve will release the minutes from its April 25 gathering tomorrow. Chairman Ben S. Bernanke said after the meeting that he’s prepared to “do more” to boost the economic recovery and ensure that inflation remains close to target.
The U.S. consumer-price index rose 2.3 percent in April from a year earlier, according to the median estimate in a Bloomberg survey of economists before the data is released today. That would be down from the 2.7 percent rate recorded in March.
“The economy is certainly not weak enough to suggest they need to move toward more quantitative easing at this point,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “It’s still on the table and will still come out in the minutes.”
Australia’s dollar rose 0.4 percent to $1.0002. It earlier touched 99.45 cents, the lowest level since Dec. 20. The currency strengthened 0.5 percent to 79.918 yen.
The so-called Aussie’s 14-day relative strength index against its U.S. counterpart dipped to 28 yesterday, below the 30 level that some traders see as signaling an asset may reverse direction. A similar gauge versus the yen fell to 26 yesterday.
To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
