Euro Slides on Germany as Spain Bonds Rise With Metals

May 23, 2014

Frankfurt (May 23)  The euro weakened for a fourth day against the dollar as German business confidence fell, fueling speculation the European Central Bank will boost stimulus. Spanish and Italian bonds gained while industrial metals rose.

Europe’s shared currency depreciated 0.3 percent to $1.3621 at 6:49 a.m. in New York, touching a three-month low. The Stoxx Europe 600 Index slipped 0.1 percent and Standard & Poor’s 500 Index futures were little changed. The yield on 10-year Spanish bonds dropped five basis points to 3 percent and Italy’s rate slid six basis points to 3.18 percent. Copper rose 0.7 percent and aluminum climbed to a three-week high.

Business sentiment in the euro area’s largest economy declined more than analysts forecast, according to data from the Ifo institute. The 18-nation common currency also declined as concern grew euro-skeptic parties will gain ground in elections this weekend for the European Parliament. New home sales in the U.S. probably rose in April, economists said before a Commerce Department report today.

“The Ifo survey is the trigger for more euro weakness today,” said John Hardy, the head of foreign-exchange strategy at Saxo Bank A/S in Copenhagen. “The worry now is that momentum is waning in the core and that strengthens the case for the ECB to move in June. There is some nervousness around the European election results too.”

Oversold Signal

The euro declined against 12 of its 16 major counterparts. Its 14-day relative strength index versus the greenback fell to 29, below the 30 level that signals to some traders an asset has fallen too far, too fast, and may be due to reverse course. The 18-nation currency slid beneath its 200-day moving average at $1.3638, according to data compiled by Bloomberg.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, fell to 110.4 in May from 111.2 the prior month. Economists predicted a drop to 110.9, according to the median of 38 estimates in a Bloomberg News survey.

Sweden’s krona tumbled 0.8 percent to 6.6417 per dollar after depreciating to 6.6438, the weakest level since Nov. 22, after an index measuring Swedish consumer confidence rose less than economists estimated.

Winning Streak

Europe’s Stoxx 600 has gained 0.5 percent this week, heading for its longest weekly winning streak since November. Trading volumes today were 23 percent lower than the 30-day average, according to data compiled by Bloomberg.

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