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Euro's charge toward USD1.40 as an anti-dollar play
The euro is trading around a 2 year high against the dollar, expectations the U.S. Federal Reserve will continue its bond purchases well into 2014 offsetting disappointing German business confidence. The Ifo institute's business climate index fell to 107.4 from 107.7 in September - it had been expected to climb to 108.
The 17 nation euro area emerged from its longest ever recession in the second quarter thanks in part to Germany's economic strength. Since then manufacturing and services output in the region has expanded, and the Spanish economy has returned to growth.
Neil Staines from the ECU group says while there is some caution about the euro's outlook in the wake of its recent gains, the single currency will probably stay firm over the next few months given the backdrop of dollar weakness.
He says we could see some technical selling ahead of USD 1.40 but on a broader macro level we need to look for "some firming or a bounce in US yields, some confirmation data is going to rebound, or on the flipside some deterioration in the eurozone."
The European Central Bank has said the eurozone will shrink 0.4 percent this year before growing 1 percent in 2014.
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