RTTNews - The euro stabilized against the dollar on Tuesday in New York as global stocks recovered some of yesterday's sharp sell off. The European currency fell against the pound and gave back early gains versus the yen.

German economic sentiment improved in August rebounding from a fall in July as the surprising economic recovery in the second quarter boosted financial market experts' confidence, a closely watched report revealed Tuesday.

Meanwhile, Commerzbank analyst Simon Junker said Tuesday that the German economy is expected to log fairly strong growth rates in the second half.

The analyst said the track record of the ZEW economic sentiment indicator as a leading indicator for the German economy is no worse than that of the Ifo business climate index. The more than expected rise in the ZEW indicator in August supports the bank's forecast for a more positive GDP figures in the second half of the year.

The euro was stable against the dollar after bouncing off of a 2 1/2-week low last night. The European currency moved around 1.4120 after hitting as low as 1.4044.

The U.S. Labor Department revealed that producer prices dropped 0.9 percent in July. This followed an advance of 1.8 percent in the previous month. Economists had expected the measure to slip 0.3 percent for the month.

Core prices, which exclude the volatile food and energy sectors, ticked down 0.1 percent in July. Economists were looking for core prices to edge up by 0.1 percent.

A Commerce Department report showed that housing starts fell 1.0 percent to an annual rate of 581,000 in July from the revised June estimate of 587,000. Economists had expected starts to rise to 598,000 from the 582,000 originally reported in the previous month.

The euro fell sharply against the British pound, reaching an eight-day low of 0.8526 before stabilizing. The drop took the common currency below a near-term trading range.

According to a report released by the Office for National Statistics on Tuesday, the UK's annual inflation unexpectedly stood at 1.8% in July, the same as in June, which was the lowest since September 2007. Economists had expected the annual rate to ease to 1.5%. Month-on-month, the consumer price index remained flat, while economists were looking for a 0.3% fall.

The euro was little-changed against the yen after giving back modest early gains. The European currency hit as high as 134.80 before later falling back toward 133.70.

The German economic sentiment indicator rose sharply to 56.1 in August, the highest since April 2006, from 39.5 in July, above the expected reading of 45. The ZEW said this value is well above the indicator's historical average of 26.5.

According to a report released by the Office for National Statistics on Tuesday, annual inflation unexpectedly stood at 1.8% in July, the same as in June, which was the lowest since September 2007. Economists had expected the annual rate to ease to 1.5%. Month-on-month, the consumer price index remained flat, while economists were looking for a 0.3% fall.

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