In US trade, the euro was marginally weaker against the dollar, but still managed to hold near the 1.25 level despite a soft August German IFO report which showed the Current Assessment index fall marginally to 111.2, with the expectations index dropping to 94.2.
In recent weeks, the euro has remained remarkably resilient with traders continuing to hold out hopes of a ‘game changing’ bond purchase programme from the ECB. Last night, ECB Executive Board Member Joerg Asmussen noted that ECB staff are ’still working‘ on the details of the bond-buying program, after which the Governing Council will discuss the various options in its policy meeting on September 6.
Traders had been hoping to hear the details of the bond purchase programme after this meeting, but with the German constitutional court not ruling on the ESM until September 12, it now appears that the market will have to wait until the next central bank meeting on October 4, something that is sure to test its patience. In other news, EU President Van Rompuy is scheduled to meet Spanish Prime Minister Rajoy later today where they are expected to discuss measures to lower the high borrowing costs of the Spanish government. Spanish 10-year yields traded above 6.3% overnight. Also, French President Francois Hollande called for quicker implementation of the June EU Summit accord and noted that the ’Euro decisions‘ must be completed by October 18, the next EU Summit date.
With so much in the way of event risk in the weeks ahead, the euro is likely to remain relatively range bound until the market has further clarity on what policymakers can and intend on delivering. Having ended yesterday’s Australian session around the 1.2505 level, the euro drifted marginally to close US trade at 1.2498. Upon reopening for Asian trade, the euro has slipped modestly to be currently trading in the 1.2470 range.