The Euro gains as a report shows that the French and German economies grew

The euro strengthened against the greenback after a German report showed Europe’s largest economy unexpectedly expanded in the second quarter, adding to signs the global recession is abating. Europe’s currency also gained for a second day versus the yen before a European report that economists said will show the contraction in the 16-nation region slowed last quarter. The dollar fell against 14 of the 16 major currencies after the Federal Reserve said it will keep interest rates low for an “extended period,” diminishing the appeal of U.S. assets. “There may be upside risks to the U.S. economic outlook,” said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp. “Risk- taking appetite is returning and the bias is for the yen and the dollar to be sold.” The EUR/USD is currently trading at $1.4250 as of 8:49am, London Time.

Canada’s dollar strengthened the most in almost a month as the nation’s trade deficit narrowed more than forecast and stocks and crude oil rose, making growth- linked currencies more appealing. The loonie briefly pared gains after U.S. Federal Reserve policy makers said they will slow the pace of their $300 billion program to buy Treasuries and now expect it to end in October instead of September. They kept the benchmark interest rate at a range of zero to 0.25 percent and said the economy appears to be “leveling out.” The Bank of Canada’s forecast that the nation’s economy will expand this quarter assumes the Canadian dollar will average 87 U.S. cents through 2011, or about C$1.15 per U.S. dollar. “A significant deviation from this level would have a negative impact on their forecast variables, and hence cause policy adjustments in response to this,” said George Davis, chief technical analyst for fixed-income and currency strategy in Toronto at RBC Capital Markets, a unit of the nation’s biggest bank. “A strong Canadian dollar will hamper the recovery.” The USD/CAD is currently trading at 1.0875 as of 9:00am, London Time.

European shares are set to open higher on Thursday, extending the previous session's sharp gains, after the U.S. Federal Reserve said it saw signs of a more stable U.S. economy and Germany and France returned to economic growth in the second quarter growth. The Fed said on Wednesday the U.S. economy was showing signs of leveling out two years after the onset of the deepest financial crisis in decades and it moved to phase out one emergency measure.

Today's Economic Events