Euro subdued before Bernanke speech

 

The euro eased today, taking a breather after last week's rally, with investors wary before the release of an influential survey on German business sentiment and a slew of euro zone events in coming weeks.

While the euro could find support before US Federal Reserve chairman Ben Bernanke's speech at an annual symposium in Jackson Hole, Wyoming on Friday, it may struggle to break above a recent seven-week high in the near term, analysts said. Volumes were thin with London shut for a holiday.

The focus was on Germany's Ifo index, the country's most influential indicator of economic health. Forecasts are for the business climate index to drop in August and a worse than expected reading could see the euro come under some pressure, analysts said.

"A larger than expected fall might create concerns about the economic situation in Europe," said Lutz Karpowitz, currency strategist at Commerzbank.

"If Germany also begins to run out of steam that would put further pressure on the European finances. As a result, a disappointing Ifo might put pressure on the euro today."

The euro eased marginally to $1.2505 staying below a peak of $1.2590 set last Thursday on trading platform EBS, its highest since July 4. Traders cited bids at around $1.2445/50 while offers were reported above $1.2530.

A speech later today by German ECB executive board member Joerg Asmussen, who said last week a Greek exit from the euro zone was manageable but not preferable, will also be closely watched for the central bank's latest thinking on the crisis, analysts said.

Last week's rise in the euro was a result of traders trimming bets against the currency. Expectations the European Central Bank will take action next month to bring down Spanish and Italian bond yields have helped bolster the euro.

It also gained ground versus the dollar after the minutes of the Fed's most recent policy meeting reignited speculation the central bank could introduce more monetary stimulus.

Reuters