Euro gains after better Ifo

The euro gained sharply on Thursday morning after a better-than-expected Ifo report, which raised speculation that the ECB will continue euro rates while the Fed is on pause following weak US housing data.

The euro traded at $1.2825 from $1.2750. The euro bought 149.30 yen compared with 148.54. The euro seems locked in a tight range of 1.2750-1.2950. The Ifo research institute in Munich said its confidence index, based on responses from 7,000 executives, slid to 105 from 105.6 in July, but better than average expectations of 104.8.

German construction spending surged the most in a decade in the second quarter, a government report showed earlier today. The German economy expanded 0.9 percent in the second quarter, the fastest rate since the first three months of 2001, according to the Federal Statistics Office.

The 12-nation slid 0.7 percent on Aug. 22 after the ZEW Center for European Economic Research index of institutional and analyst expectations dropped to -5.6, the lowest since June 2001, from 15.1 in July.

The ECB has raised rates four times since December to 3 percent and investors expect another two increases to 3.5 percent by year-end, futures trading suggests. The dollar may extend losses on speculation reports today will show purchases of new homes and orders for U.S.-made durable goods fell in July, lessening the need for the Federal Reserve to resume rate increases.

Sales of new homes, which account for about 15 percent of the market, dropped 2.7 percent in July to an annual pace of 1.1 million, the second-slowest this year, from a 1.131 million rate in June, according to the median estimate to a Bloomberg News survey. The Commerce Department releases the report at 10 a.m. in Washington.