EUR Drops Once Again Following Negative Data

Following the release of a worse than expected German Ifo Business Climate and Flash Manufacturing PMI yesterday, investors grew increasingly concerned that the euro-zone's strongest economy may also be vulnerable to the region's debt crisis. As a result, the euro dropped to an almost two-year low against the USD, reaching 1.2515 during the morning session. Against the Japanese yen, the euro fell some 80 pips, reaching as low as 99.34. The pair then managed to stage an upward correction, eventually stabilizing around the 99.90 level. Turning to today, a lack of significant euro-zone news means that the common currency will not have many opportunities to stage a meaningful recovery ahead of markets closing for the week. That being said, the euro may be able to limit its losses if any announcements out of the euro-zone signal that progress is being made in talks about how to best stimulate growth in the region's economic recovery. That being said, any additional negative news may lead to risk aversion which could send the euro lower.

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