The euro softened after data showed confidence in the
economy weakened more than expected in both Germany
and France,
the heart of the euro zone's economy. The GfK consumer confidence indicator
fell to 4.9 points in June compared with 5.6 points in May and against
analysts' forecasts for an improvement to 5.8. In France, the Insee business
confidence dropped to 102 in
May from 106 in
April, beyond estimates for a more modest fall to 104.
The releases pushed the euro
lower against other major
currencies, but analysts warn these losses are likely to be short-lived ahead
of key German inflation data, which is expected to hit a record high. German
CPI inflation is forecast to rise to 3.6 percent in May, matching March's
historical high.
The persistently high oil prices will also feed into this speculation, as
the longer commodity prices remain high, the more likely the price pressures in
the euro zone will keep the ECB from loosening monetary policy to help the
economy.
Meanwhile, the US consumer confidence is expected to have
dipped to 60.0 in
May from 62.3 in
April; new home sales are forecast to have fallen to an annualised 522,000 unit
rate in April following a 526,000 unit rate in the previous month.