German Industrial Output Data Lifts Euro

   on May 09 2013 8:25 AM

German industrial output data lent strength to the euro on Wednesday and lifted the currency to nearly a one week high. Overnight the common currency maintained some of those gains and traded at 1.3149 on Thursday morning.

Investors took comfort in unexpectedly positive German industrial output data which showed a marked increase in March. The BBC reported that the nation's industrial output grew 1.2 percent from the previous month and surprised analysts, who were expecting to see a decline. The figures came after a rise in factory orders was announced on Tuesday.

With two days of solid data, many are optimistic about the state of the German economy and its ability to recover from its recent stint of poor data. As the largest economy in the eurozone, Germany has been under quite a lot of pressure to maintain a stable economy amidst a widespread financial crisis.

Gains from German data were not enough to offset all of the downward pressure on the euro from last week's European Central Bank meeting. The bank's decision to lower interest rates as well as suggesting it was prepared to lower deposit rates drove the currency down and created uncertainty among investors.

Jorg Asmussen, a member of the ECB's executive board said on Wednesday that the eurozone was in for big changes in the future. In response to a question during a hearing on Cyprus' bailout, Asmussen claimed that the region would eventually get rid of the “troika” and stop involving the International Monetary Fund in the eurozone's financial problems.

While abandoning the troika now could prove chaotic because of active bailouts, the region eventually plans to create a crisis-resolution mechanism which will stem from the European Stability Mechanism. When the ESM is fully institutionalized, Asmussen claimed the region would have the tools it needs to deal with a crisis internally.

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