Euro traded higher against most major counterparts early in the European session as market sentiment was lifted by better than expected economic data from Germany.
The German economy, which is considered to be Europe’s powerhouse, showed signs of improvement as exports rose 2.5 percent in November. This helped the country’s trade surplus expand to 15.1 billion euros, beating forecasts of a drop to 12.3 billion. Previous data showed the trade balance at 12.5 billion euros.
Data compiled by the German Federal Statistical Office (Destatis) on the basis of provisional data, indicated that on a year-over-year basis, Germany’s exports increased by 8.3% and imports by 6.7% in November 2011 versus November 2010. Month-on-month data showed exports increased by 2.5% from October to November, while imports decreased by 0.4%.
The news was a sigh of relief to markets which were jittery at the start of the trading week this morning over concerns of the European debt crisis. The euro touched a fresh 16-month low in Asian trade of $1.2665 and has since recovered and climbed back up to 1.2774 just before 9:00 GMT.
An added reason to the lift in the euro is that many traders are trimming their short positions on euro, as there has been a record number of short EURUSD positions.
The focus now turns to German industrial production data due at 11:00 GMT. Another surprise in numbers on the upside will further boost the euro but for the moment, the forecast indicated a drop in production by 0.5 percent versus a previous 0.8 percent increase.
Also on the calendar today is the meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy in Berlin. They will be discussing tighter fiscal integration measures in the euro zone, which was put forward in the last EU Summit meeting early in December.