Euro ticks higher in midday London trade ahead of Wall Street open

The euro ticked higher in midday London trade despite the fall in German manufacturing orders, but remains vulnerable to another move down when Wall Street opens later today, dealers said.

Wed, 07 Aug, 2002 - 13:57

The euro ticked higher in midday London trade despite the fall in German manufacturing orders, but remains vulnerable to another move down when Wall Street opens later today, dealers said.

Today sees the release of US consumer credit figures for June, at 3.00 pm. Consensus is for consumer credit to rise by $7.8bn (€8bn) in June, after credit expanded 9.5 billion US dollars in May. The slower pace of auto sales in the month is expected to have moderated credit growth slightly.

However, a significant slowdown in consumer credit will raise concerns about US consumption, they added.

"I wouldn't be surprised if the euro's current recovery runs out of steam and the unit falls towards the $0.962 level, before we see a more sustainable recovery", said Ian Stannard, strategist at BNP Paribas.

But the much weaker-than-expected German manufacturing orders for June failed to destabilise the single European currency.

Orders fell 3.2% in June, the weakest monthly decline since September 2001, against a market consensus for a seasonally adjusted fall of 1.5% versus May. Behind the fall in orders was a steep decline in export orders and particularly capital export orders.

"German orders were on the negative side for the euro, although there were distortions from the strike in May," he said.

Investors are watching leading indicators, such as orders, to see whether the global recovery is starting to stall.

Friday's US second-quarter productivity data will be key for the currency markets, they added.

Euro-sterling was also higher following the release of the Bank of England's quarterly inflation report.

The profile of the UK economy is still not looking that favourable for sterling, said Stannard.

The combination of disappointing retail sales, a manufacturing sector looking very fragile and heightened risk that the global recovery is stalling, is likely to put sterling under pressure, he added.

"The inflation report pointed out that the housing market was very important and that any weakness there will feed through more quickly than stocks on confidence," he said.

Against the yen, the euro was also firmer.

London 12.20 pm London 8.46 am

Dollar

yen 120.69 down from 120.74

sfr 1.5050 up from 1.5048

Euro

usd 0.9695 up from 0.9679

yen 117.01 up from 116.85

stg 0.6311 up from 0.6290

sfr 1.4592 up from 1.4570

Sterling

usd 1.5360 down from 1.5383