Euro continues its rise against the US dollar

The euro continued its rise against the dollar on Friday, finishing at $1.3240 up from $1.3142 at the start of the day. In early trading, the euro rose against the dollar after a key survey of German business confidence indicated tentative signs of recovery in the eurozone economy. April’s IFO Business Climate index survey showed a rise to 83.7 from 82.2 the previous month, much higher than the 82.3 analysts expected. As a result, investor risk aversion weakened and they bought into the euro, taking it to a one-week high against the greenback. This shift in favour of the single currency was also aided by the announcement that French consumer spending for April was stronger than expected. In the US, ongoing concerns over government stress tests on US banks further contributed to the euro’s gains over the dollar, as investor jitters over whether there may be further bad news to come weighed on their minds.

Interestingly, Ford’s admission that they had lost $1.43bn in the first quarter of 2009 did little to dissuade investors from buying into riskier currencies, primarily because that was far less than the $7.2 billion the company had lost in the last three months of 2008. It is now targeting 2011 to break even. The dollar’s slide against the euro was further extended after better-than-expected data released by the US Census Bureau reduced investors’ risk aversion. Their Durable Goods Orders data for March stood at -0.8%, much higher than analysts had predicted, and therefore investors looked beyond the perceived safe-haven currencies. Worse-than-expected property data from the US did little to stem the euro’s gains, despite signs that the housing market continues to slow. New Home Sales in March were reported at -0.6%, far weaker than the 0.9% growth predicted by analysts.

In early trading today the euro has pared some of the gains it made last week, following news over the weekend that Spain’s unemployment rate hit 17.4% at the end of March, double this time last year. There is also wariness in the market ahead of the President of the European Central Bank’s speech at 17.45 BST today. Investor’s will be studying Jean Claude Trichet’s words carefully as they try to decipher what measures he intends to implement to get the eurozone out of recession. As a result, there has been a flight to the perceived safe-haven of the greenback this morning as investors look to reduce risk. There are no major announcements due in the US today.