Forex - Euro turns higher as market sentiment improves

Investing.com - The euro was higher against most of its global counterparts on Tuesday, as market sentiment was boosted by better-than-expected German and euro zone data although the downgrade of six European nations continued to weigh.

During European late morning trade, the euro was higher against the U.S. dollar, with EUR/USD adding 0.14% to hit 1.3204.

The euro strengthened after data showed that German economic sentiment improved significantly more-than-expected in February, turning positive for the first time since May 2011.

The ZEW Centre for Economic Research said that its index of German economic sentiment improved to 5.4 in February, compared to January’s reading of minus 21.6. Analysts had expected the index to improve to minus 11.6 in February.

Meanwhile, economic sentiment in the euro zone rose in February to minus 8.1 from minus 32.5 in January. Economists had expected euro zone economic sentiment to improve by 11.4 points to minus 21.1.

Sentiment was hit earlier after Moody’s Investors Service cut the debt ratings of six European countries earlier, including Italy, Spain and Portugal, and said it may strip France and the U.K. of their top Aaa ratings, citing the euro zone’s debt crisis.

The euro was also higher against the pound, with EUR/GBP rising 0.15% to hit 0.8376.

Official data showed earlier that consumer price inflation in the U.K. rose 3.6% in January, in line with expectations, after a 4.2% rise the previous month.

A separate report showed that U.K. retail prices rose less-than-expected in January, advancing 3.9% after a 4.8% increase the previous month. Analysts had expected retail prices to rise 4.1% in January.

The single currency was also higher against the yen and was almost unchanged against the Swiss franc, with EUR/JPY climbing 0.68% to hit 102.99 and EUR/CHF inching down 0.04% to hit 1.2081.

Earlier in the day, the Bank of Japan unexpectedly eased policy by adding JPY10 trillion to its asset-purchase program. The bank also set a 1% inflation target “for the time being” and stated that positive consumer-price growth would be defined as below 2% year-on-year.

Elsewhere, the euro was higher against the Australian and New Zealand dollars, easing off record lows, with EUR/AUD advancing 0.24% to hit 1.2317 and EUR/NZD adding 0.17% to hit 1.5842.

Industry data showed earlier that an index of business confidence for Australia rose to 4 in January from 3 the previous month.

In New Zealand, a report showed that house prices fell 1.4% in January after a 0.1% drop the previous month.

The euro was steady against the Canadian dollar, with EUR/CAD edging 0.02% higher to hit 1.3185.

Later in the day, the U.S. was to release official data on retail sales, as well as reports on import prices and business inventories.

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