The Euro to US Dollar exchange rate rallied on Tuesday as the single currency received support from the release of stronger than forecast German and Eurozone Economic Sentiment data.
According to the ZEW Centre for Economic Research, its index of German economic sentiment increased by 4.6 points to 53 this month from January’s reading of 48.4. The figure was the highest seen since February 2014 but slightly below economist expectations of 55.0.
A separate report for the Eurozone, meanwhile, showed that economic sentiment across the 19-member currency bloc rose strongly from 45.2 to 52.7. The increase was better than economist forecasts for a rise to 51.69.
The US Dollar weakened following the release of soft manufacturing data from the New York region, adding to concerns over the strength of the US economic recovery. The Federal Reserve Bank of New York, general business conditions index decreased to a reading of 7.8 this month, from a reading of 10.0 in January. Analysts had been expecting a dip to 8.5.
The report also showed that the index of business conditions over the next six months declined sharply from 48.35 to 25.58 in February. The decline of 22.77 was the largest decline since January 2009.
The pace of growth in employment also decreased, with the index for the number of employees down to 10.11 from 13.68 in January.
The Euro is forecast to go onto the retreat later in the week, as concerns over the Greek crisis are likely to rise as Monday’s crunch talks between the Syriza led Government and European Finance Ministers ended in failure.
Greece’s current €240 billion bailout is set to expire at the end of this month and the new government has rejected an extension, setting the nation on a course that could see it run out of money and potentially leave the Eurozone. A deal must be reached by February 28. A number of leading economists have raised their bets that a ‘Grexit’ will happen to as high as 50%.
Also set to weigh upon the Euro are concerns over the situation in Ukraine. A ceasefire appears to have failed just two days after coming into effect as pro-Russian rebels announced that they had captured the strategically vital transport hub at Debaltseve. More economic sanctions are likely to be imposed upon Russia as a result and an escalation of the crisis could drive the Euro lower.