Euro Falls to 5-Week Low as German Confidence Drops

The euro fell to a five-week low versus the dollar after a gauge of German investor confidence declined for a fifth month, fueling speculation the European Central Bank will take measures to boost the region’s economy.
The shared currency weakened for a fifth day after the Wall Street Journal reported that Germany’s Bundesbank is willing to back stimulus measures from the ECB next month if staff forecasts show a lower 2016 inflation outlook. Sweden’s krona strengthened versus 12 of its 16 major peers after a report showed the nation exited deflation in April, damping the case for interest-rate cuts. Australia’s dollar fell after data showed Chinese industrial production and retail sales slowed.

“The euro is falling on a report that Weidmann is saying he’s ready to cut rates if needed,” said Manuel Oliveri, a currency strategist at Credit Agricole SA’s corporate and investment banking unit in London, referring to Bundesbank chief Jens Weidmann. “There’s a lot of focus on Weidmann because, as the Bundesbank president, he’s on the least dovish side when it comes to the ECB. This is supporting the notion that there’s a quite high probability of the ECB acting next month.”

The euro fell 0.3 percent to $1.3713 at 6:41 a.m. New York time after declining to $1.3712, the least since April 7. The yen fell 0.2 percent to 102.28 per dollar after depreciating to 102.36, the weakest level since May 2. Japan’s currency strengthened 0.2 percent to 140.26 per euro.
Ebbing Confidence

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict German economic developments six months in advance, slid to 33.1 in May from 43.2 in April. The gauge is at the lowest level since January 2013. Economists forecast a decline to 40, according to the median of 33 estimates in a ForexSQ News survey.

The euro has weakened 1 percent in the past month, the second-worst performer of 10 developed-nation currencies tracked by ForexSQ Correlation-Weighted Indexes. The Swiss franc had the biggest drop at 1.4 percent. The dollar gained 0.4 percent, while the yen fell 0.3 percent.

ECB President Mario Draghi has signaled he may add monetary stimulus in June because policy makers are “dissatisfied” with the inflation outlook, in part due to an increase in the exchange rate.
Swedish Inflation

The krona advanced for a second day as Statistics Sweden said consumer prices in the nation were unchanged in April from a year earlier. A ForexSQ survey of economists predicted a decline of 0.1 percent.

The Riksbank last month signaled greater willingness to cut borrowing costs, and delayed tightening plans until the second quarter of next year even as a majority on the board is reluctant to ease monetary policy to avoid a further buildup in consumer debt.

The krona rose 0.4 percent to 8.9973 per euro after appreciating to 8.9941, the strongest since April 10. The Swedish currency gained 0.1 percent to 6.5618 per dollar.

The Australian dollar weakened as China’s industrial production rose 8.7 percent in April from a year earlier, less than the increase of 8.9 percent forecast by economists surveyed by ForexSQ. The country’s retail sales rose 11.9 percent last month, falling short of economists’ forecast of 12.2 percent. China is Australia’s largest trading partner.

The Aussie dropped 0.2 percent to 93.46 U.S. cents after appreciating to 93.94 cents on May 8, the highest level since April 15.

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