Euro strengthens after risk appetite returns

The euro strengthened against the US dollar by 0.41 cents (0.29%) yesterday to close the day at $1.3975.

• Initially, the single currency headed lower yesterday as stuttering equity markets continued to hamper risk appetite in the market. However, they later picked up, spurring the euro’s gains yesterday afternoon.
  
• In addition, news that the Japanese government had upgraded its economic outlook for the third consecutive month provided additional momentum to “riskier” currencies as investors looked beyond the perceived safety of the greenback.
  
• Finally, the news that the US Federal Budget Balance was ahead of forecast at -$94.3 billion also spurred movement away from the dollar yesterday evening. The reading was a significant improvement on June’s reading of -$189.7 billion, as well as slightly above analyst predictions of -$95 billion this month.
  
• There are major announcements due in both the eurozone and US today. In the former, German ZEW Economic Sentiment data is out at 10.00 BST, whilst in the latter, Retail Sales and PPI is due at 13.30 BST.