EURUSD

EURUSD

The Euro was unable to push back above the 1.40 level against the dollar in Asian trading on Monday and had a significantly weaker tone in Europe. The Euro-zone Sentix index was weaker than expected with a deterioration to -31.3 for June from -27.0 the previous month which reinforced fears that any improvement in the economy would stall quickly. In addition, there were renewed fears over the regional banking sector following larger than expected losses at the German IKB bank.

The Chinese Foreign Ministry offering further reassurance on the dollar which helped underpin the currency, although comments from Russian and Indian officials were less supportive and the debate will remain a very important issue. Markets will also remain on alert for comments from G8 officials ahead of meetings this week which start on Wednesday.

The US ISM index for the non-manufacturing index strengthened to 47.0 from 44.0 the previous month and this was above market expectations. Most components improved, although employment was still at a very low level. The data will offer some degree of reassurance over the economy and helped stabilise risk appetite.

As confidence improved, the Euro found support and pushed back to the 1.3980 region from a low near 1.3875 ahead of the US open and with no major data releases due on Tuesday.