The euro hovered at near 1-year lows against the dollar after coming under pressure by European Central Bank Chief’s dovish comments on Friday at the Jackson Hole Symposium.
Mario Draghi signaled that inflation in the Eurozone had dropped to levels that would open the door to more policy action by the ECB, which would include more quantitative easing.
These comments dented sentiment in the euro which fell to an 11-month low of 1.3184 on Friday. The bearish bias on the euro continued today after soft German data and pushed the euro by one pip lower to 1.3183.
The Ifo survey on German businesses showed that business sentiment dropped for a fourth consecutive month in August. This was partly due to concerns about the Ukraine crisis and the impact that sanctions would have on the Eurozone economy.
The business climate index fell to 106.3 versus a previous 108.0 and 107.0 expected, while the current conditions index dipped to 111.1 from a prior 112.9 and compared to 112.0 expected. The Ifo business expectations index also disappointed at 101.7 versus 103.4 in July and 102.0 forecast.
Sterling bounced higher despite a UK holiday today. There was a significant rebound from the Asian session low of 1.6534 to a high of 1.6597. The gains in the pound pushed the euro lower against it to a 9-day low of 0.7950.
The dollar eased lower against the yen after peaking at a new 8-month high of 104.26 today. The dollar/yen opened in Asia with a gap higher as sentiment for the greenback was strong following a less-dovish-than-expected Janet Yellen, where the Fed Chair spoke at Jackson Hole on Friday. The dollar however filled the gap and entered today’s US session near Friday’s close of 103.92.
Meanwhile a speech by Bank of Japan Governor Haruhiko Kuroda on Friday suggested that it was not necessary to change economic forecasts for Japan and implied that policy easing would continue. This helped undermine the yen.
For the US session, US Markit services PMI and new US home sales data are on the economic calendar today.