Euro fails to rise on German Ifo as demand for safe havens preferred

August 27, 2013

Risk aversion stemming from a possible U.S led military intervention in Syria has lifted  safe haven assets on Tuesday. Emerging market sell off also increased flows to quality assets.

As a result, we’ve seen a boost in yen as well as in the dollar and gold while riskier currencies like euro, pound and aussie all fell.

The only key economic data released during the European session today was the German IFO index which seemed to have little impact on euro. The data was strong beating expectations at 107.5 versus a forecast of 107.0, showing business sentiment in Germany was at its highest level in 16 months.

EURUSD was well supported in advance of the release of the German IFO data, rising to a session high of $1.3386 immediately after the data and sold off afterwards to $1.3322 before stabilizing. The markets remains short on sterling as investors are cautious ahead of what is expected to be dovish commentary from Bank of England governor Mark Carney tomorrow. The BOE chief is expected to reiterate a pledge to keep interest rates low. This would weigh on pound.

GBPUSD declined to $1.5494 heading into the U.S. session, falling since opening in Asia at $1.5572.

USDJPY is weighed by  risk aversion, falling to 97.53 going into the New York trade, down from 98.48 in Asia.

AUDUSD slid to a $0.8932 low as emerging market out flows weighed on the risky aussie.

Gold was buoyed by safe haven flows, lifting the precious metal to $1,418.58 after climbing from a European session open of $1,400.79.

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