Euro's Scope to Recover Looks Limited — Market Talk

What happened

The euro rose 0.1% to $1.1135 after hitting a 17-month low of $1.1111, ING's Chris Turner says its recovery looks limited due to France's unresolved budget crisis and high energy prices.

Confirmed

Global impact / market context

A weaker euro can raise import costs for eurozone companies and squeeze profit per sale, while tighter bank lending conditions and falling loan demand may reduce cash available for capital spending and daily operations.

Analyst inference

Traders are weighing European Central Bank tightening expectations against softer lending data, while US bond yields stay high before a Fed rate decision, which can pull money toward dollar assets and pressure the euro.

Analyst inference

What to watch

1. Watch whether the euro falls below support around $1.1065-$1.1110; Turner says a drop below that range could open a move toward $1.0880. Confirmed
2. Watch the ECB press conference for signals on market rate expectations, since Turner says it may be too early to push back but risks of doing so are building. Analyst inference
3. Track eurozone lending conditions and loan demand after Tuesday's survey showed tighter standards and an unexpected fall, which can affect credit for companies. Proposed

Evidence

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