Plunge in German Business Confidence Stalls Euro

A surprise drop in German business confidence – the first decline in 11 months – caused the euro to fall and pushed European stocks into negative territory. The Dow Jones Stoxx 600 Index lost 0.5 percent at 1:45 p.m. in London, while futures on the Standard & Poor’s 500 Index retreated 0.4 percent. Oil prices also slid 2.4 percent as investors turned to the dollar as a safe haven.

Yesterday’s unexpected increase to the Discount Rate is not seen as an indication that the Fed will increase its Federal Funds Rate in the near-term. The popular consensus remains that the Fed will maintain 0.25 percent as the benchmark interest rate at least until the end of the year.

“Growth is recovering, but it’s not recovering too fast to have the major central banks tighten monetary policy,” Rajeev de Mello, the Singapore-based head of Asian investment at Western Asset Management Co. said in an interview on Bloomberg Television. “We don’t think that the Fed’s going to tighten until very late this year, if at all. We don’t think the ECB is going to tighten.”

Source: Bloomberg

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