The German factory orders data was sharply stronger than expected with a 4.4% monthly increase in orders compared with expectations of a marginal increase. The data will increase hopes that the economy has hit a low point and should alleviate underlying fears to some extent, although confidence will inevitably remain very fragile.
Following the data, the Euro pushed to highs near 1.4050 as risk appetite attempted to stabilise.
Comments from officials on the dollar and international reserve policies will remain extremely important, especially with the G8 meetings starting on Wednesday.
There has been further speculation that officials will cast doubt on the dollar’s medium-term role as the principal reserve currency. French officials stated that the summit was not the place to discuss currencies which will dampen expectations of significant comments.
There also appears little incentive for global policy-makers to talk down the dollar and the US currency may, therefore, secure some relief during and after the meetings, especially if there are supportive comments. As risk appetite deteriorated again, the US currency pushed back to near 1.39 during New York trading.
By: Darrell Jobman
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