Euro loses ground but ECB hopes could limit losses

The euro lost ground on the dollar on Wednesday, hampered by weak economic data from Germany and profit-taking on the back of three consecutive days of gains; however, losses could be short-lived as optimism remains that the European Central Bank may launch measures to reduce Italian and Spanish borrowing costs.

The single currency’s sell-off against the British pound after no hint was given by the Bank of England over whether it would kick-start further stimulus also applied pressure on the currency. BNP Paribas currency strategist Mary Nicola said that the combination of profit-taking and the disappointing German data was the main reason behind losing ground on the greenback, but overall the euro continues to squeeze higher.

Germany’s industrial output saw a more-than-anticipated-decline in June which, although marginal, slowed the rally enjoyed over the past few days. Meanwhile, the country’s imports fell dramatically and exports fell too in the three months ending 30 June. On Tuesday, figures revealed that Italy fell deeper into recession during Q2, while industry orders in Germany saw a more-than-expected drop.

The common currency was last seen at $1.2339, down by five per cent and falling after gains which saw it climb to $1.2443, a one-month peak, on Monday.