The latest optimism indicator from the 17-member single currency bloc increased from 95.3 in August to 96.9 in September. This is the fifth consecutive monthly increase, taking optimism to a two-year high. Unfortunately, unemployment is also on the rise in the region, and until we see the jobless rate decrease the euro will remain constrained.
The recent political uncertainty in Italy has had a negative impact on the country’s bond issuing ability. The cost of borrowing for the Italian government has ticked up to 4.5%, the highest level since June, due to the possibility of the coalition collapsing. Silvio Berlusconi’s right-of-centre party has threatened to pull out of the flimsy alliance; if this were to happen we could see the euro slide versus the US dollar.
The closely-watched University of Michigan consumer sentiment index is released at 2.55pm (London time), with consensus estimates for a reading of 78.2, which would be an improvement on the August report at 76.8. If the figure comes in below 78.2, the euro could move higher.