Euro Stronger Despite Significant Drop in German ZEW Index

Euro is rallying despite German ZEW index that dropped to levels not seen since the end of 2008. Eurozone PMIs disappointed as well. Market turns to Canadian Retail sales and US housing and manufacturing data.

USD is weaker across the board in a session filled with disappointing data releases. The situation in Germany continues to deteriorate as August ZEW Economic sentiment dropped to -37.6 from previous -15.1 which is the worst print since December 2008. Slowing GDP growth likely contributed to such a poor result. Other news from Germany showed that Manufacturing PMI stayed unchanged at 52.0 and Services PMI dropped to 50.4 from 52.9

Data for the whole Eurozone also disappointed as Manufacturing PMI dropped to 49.7 from 50.4 confirming a manufacturing sector contraction. Services PMI came out lower at 51.5 from 51.6 and ZEW Economic sentiment dropped to -40 from -7 also showing low numbers not seen since the end of 2008.

The rally in Euro is attributed to PBOC advisor Xia Bin who said that China is worried about the safety of its currency reserves which suggests continued interest in diversifying out of the USD.

The New York session starts at 8:30 am ET with Canadian Retail Sales for June that are expected to grow by 0.6% from previous 0.1%. Core measure is projected to slow to 0.3% from previous 0.5%. The recovery in oil underpins the CAD so positive surprise in sales should help it catch up with other majors.

July New Home Sales due at 10:00 am ET should increase slightly to 313K from 312K which is well within the range seen over the past four months.

Richmond Manufacturing Index that is also due at 10:00 am ET is expected to show yet another decline and drop to -7 from previous -1. The recovery seen at the beginning of the year has completely reversed and the projected result would be the lowest since April 2009.