Euro Corrective Weakness: Already Behind Us?

May 21, 2008

A stronger-than-expected German IFO business climate index lifted
Euro to a three-week high against the US dollar Wednesday. The headline
index came in at 103.5 in May from 102.4 in April, versus a 102
forecast. An indicator measuring expectations for future business rose
to 97.3 from 96.7. IFO said today that “the downturn in the German
economy will be rather moderate” and “we will see at least 2% growth
this year.”

German Economic minister Glos said today that the recent
surge in German IFO business sentiment shows that growth risks have not increased
despite the effects of a stronger Euro, higher oil prices and financial
market instability. Indeed, Germany is faring far better than other
European countries like Spain and Italy, and definitely much much
better than the US. Volkswagen (VLKAY.PK), Europe’s largest car manufacturer, said
it boosted auto sales in China by 28% in the first four months of the
year.

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