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Euro to Dollar News for 25th March 2009

This morning fundamental news in Europe kicked off with the German IFO figures which came in almost  bang on forecast at 82.1 against 82.2.  IFO figures measure the level of business confidence based on a survey of around 7000 businesses which asks respondents to rate business conditions for the next six months.  This morning’s figure is the lowest recorded in more than 26 years which confirms that the recession in Germany is deepening and showing its lowest level since 1982.  The global slump in demand has forced many German companies to cut back production and reduce the workforce accordingly.  This is generally considered a leading indicator of the health of the economy and would, under normal circumstances, impact the currency.  However, the market is waiting for US Core Durable Goods Order due for release later in the morning along with Durable Goods Order and once these numbers have been released we may see some activity in the euro to dollar pair. This data measures the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding major transportation items such as aircraft etc. It is generally considered a leading indicator of the economy and the release is red flagged on the economic calendar so should have an immediate impact on the US dollar. The forecast is for -2.0% against a previous of -3.0%. At the same time the more broad data figures for Durable Goods are also released which includes all durable goods generally defined as products having a life expectancy of more than 3 years.  Again as a leading indicator it sends a clear signal to the market of the economic health of the country.  In this case the forecast is for -2.3% against a previous of -4.5%.

The next major news item on the economic calendar is new home sales which, as the name suggests, indicates the number of new homes sold during the previous month.  The forecast is currently for 302k against a previous of 309k but based on figures released earlier in the month we could see a better than expected result here as some commentators have started to call the bottom of the housing market and hence the start of the long road back to recovery.

The final piece of news is the crude oil inventories released by the EIA which measures the change in the number of barrels of crude oil held in inventory.  The forecast is for stockpiles to jump by as much as 1.4 million barrels whilst gasoline stockpiles as expected to fall by 900000 barrels and distillate stocks to fall by 200000 barrels.  Refinery capacity is expected to remain the same at 82.1%.  Remember that these figures can often influence the usd to cad more significantly than the euro to dollar due to Canada’s pre-eminence in the energy sector.

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