Euro climbs on German business confidence

Shares in Europe dipped on Wednesday but the single currency turned higher versus the US dollar after the Ifo Business climate index showed confidence in Germany is improving. The business climate index climbed to 107.9 in March its highest level since July 2014, and was up from 106.8 in February - its fifth consecutive month of increases.

The monthly survey of around 7,000 firms essentially takes a snapshot of business morale in the industry, so it’s an indication that the German economy - Europe’s largest - has powered ahead in the first three months of 2015. The Ifo survey also noted that German optimism for the six months ahead improved as well.

Data also on Wednesday illustrated that business morale in France reached a near three-year high, indicating that Europe-wide sentiment is on the up.

However, stocks in Europe edged lower despite the positive business climate data, however equities remained close to recent seven-and-a-half-year highs.

Germany’s DAX declined a little more than 0.6 per cent, the CAC 40 fell around 0.8 per cent and the Euro Stoxx 50 was over 0.7 per cent in the red.

EUR/USD remained close to recent highs despite a pause in the dollar selloff, while the British pound’s decline deepened against the single currency. The greenback continues to range in the vicinity of a two-week low that was reached in the aftermath of the dovish Fed statement. However, the recent rise in US inflation data could give the Federal Reserve reason to consider raising rates, which will be positive for the dollar.

The dollar index could return to territory above the psychological 100.00 barrier, which it last struck in mid-March to hit a near 12-year high.

A stronger dollar would add further pressure to crude oil prices, which continue to suffer from oversupply concerns. Brent crude trades around the $55 per barrel handle while US crude is ranging above the $47 per barrel level.