Euro rises against US dollar as risk aversion falls

The euro strengthened against the US dollar by 0.68 cents yesterday, finishing the day at 1.3628.

• In early trading yesterday the single currency rose against the US dollar, as risk aversion in the market continued to diminish. Monday’s strong equity market performance carried over to early trade yesterday, with the FTSE 100 up 0.5% mid-morning.
  
• These early gains by the euro were further extended following the release of better-than-expected German ZEW Economic Sentiment data released mid-morning. It registered a rise to 31.1 in May from 13.0 last month, buoying investor confidence that an economic recovery in the eurozone may soon be underway. Importantly, the reading was also well ahead of analysts’ forecasts of 20.0.
  
• However, weaker-than-forecast Building Permit figures released in the US significantly reduced the single currency’s gains mid-afternoon. April’s reading of 0.49m was much lower than the 0.52m recorded last month, and also the 0.53m analysts had forecast. This induced an immediate flight to safety, with some investors offloading the “riskier” euro in favour of the greenback as they worried a global economic recovery may yet be some way off.
  ,li>Nevertheless, the euro closed the day slightly up against the dollar as strong European equity market performance continued to ease risk aversion in the market.
  So far today the single currency has edged slightly higher against the dollar as investors continue to speculate that the eurozone may be on the cusp of an economic recovery.
  ,li>There are no major economic announcements due in the eurozone today, whilst in the US, the Fed’s Minutes from their last policy meeting are due at 19.00 BST.