Euro rate today: EUR underpinned by continued investor interest in Eurozone business climate

There were choppy moves in EUR/USD yesterday and the rate broke higher overnight after dovish comments from Bernanke. With little on the Eurozone calendar today, focus will be on key UK and US releases today.

A look at the latest euro exchange rates reveals:

• The euro dollar exchange rate: EURUSD has rallied to 1.3581 taking out lite demand at 1.3550 and re-entering the uptrend channel from July. While MACD remains below the zeroline, RSI and Stochastic are pointing upwards. The 65- DMA at 1.3482 should provide near term support to any brief sell-offs.
• The euro pound exchange rate is 0.14 pct lower at 0.8387.
• The euro Australian dollar exchange rate is 0.42 pct higher at 1.4415.

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Investor confidence underpins the euro

The rally in the euro is once again gaining some upside momentum, largely on the back of better than expected euro data.

German investor confidence rose to its highest level since October 2009.  

"While investors grew less optimistic about current conditions, the recent interest rate cut has made the outlook brighter.  Of the 3 reports on the calendar this week, the ZEW is generally the least market moving for the euro compared to PMIs and IFO because the former is a measure of confidence and the latter are measures of activity," says Kathy Lien at BK Asset Management.

Nonetheless, the PMIs and German IFO should benefit from the same rate cut as the ZEW.

"As we are looking for improvements in all 3 reports, EUR/USD should be able to hold onto its gains as long as the FOMC minutes aren't overly hawkish and U.S. retail sales growth remains modest.  Meanwhile ECB governing council member Praet also shed light on the central bank's recent decision to lower rates," says Lien.

Praet said "although we had been surprised by a drop in inflation in October to 0.7%, that was not the reason we lowered the rate on the main refinancing operations on 7 November.

"The reason was that we were expecting inflation to remain weak ...for an extended period of time" and "we believe our decision has rebalanced the risks to price stability, which had become tilted to the downside. We think deflation was not in sight before, and has become even more unlikely after our decision. Our decision has increased the buffer against unwelcome price surprises."

According to Lien these comments suggest that barring a significant deterioration in the Eurozone economy, the ECB won't be looking to cut interest rates again - another plus for the euro.