EUR/USD struggles to make ground with central banks in a battle of the doves

FXstreet.com (Barcelona) - The euro showed some falls on weaker than expected German sentiment and dovish European Central Bank comments. But in a battle of the doves, any gains to be made by the dollar against the common currency have been sandbagged by Fed support of continuing ultra-loose policy.

The LFO business climate index, based on a monthly survey of 7,000 firms, indicated that German sentiment rose to 107.7 in September, missing the consensus forecast of 108.2. The figure compared with a revised reading of 107.6 in August.

The number represents a 17-month high, but given the recent strong momentum of German macro data, it still disappointed.

While the miss on consensus was minor, markets have been particularly sensitive following comments from European Central Bank president Mario Draghi yesterday that the ECB would be prepared to maintain cheap borrowing rates through its long-term refinancing operation (LTRO) mechanism in order to hold down money market rates.

ECB Governing Council member Ewald Nowotny reinforced Draghi’s stance today by saying that any European growth remained too fragile for the central bank to remove its support.

EUR/USD is currently trading at USD1.3487, barely dipping below its USD1.3492 opening price.