The July German IFO –business indicator fell to 97.5 from 101.3 the month prior, as rising inflation, higher interest rates and a slowing global economy weigh on business leaders. It was the lowest reading in almost three years for the survey of 7,000 executives. The ECB raising their benchmark rate to 4.25% at their last policy meeting has increased credit costs for business that are already dealing with rising energy and raw material prices. Additionally, the strength of the Euro has led to European exports becoming less competitive in the global marketplace.  Fears are that the central bank will continue their tightening bias as they try and adhere to their price stability mandate. ECB member Klaus Liebscher stated in a recent interview that the development of inflation is a cause for concern and that everything needs to be done to avoid the second round effects. Meanwhile, the regions economy continues to show signs of slowing down as the PMI composite fell to 47.8 from 49.3, the lowest level since March 2006. The downside risks of the economy may keep the MPC from a rate hike in the near term, especially with oil prices easing. If inflationary elements continue to abate, the next move for President Trichet may be to actually cut rates as slowing growth becomes a significant risk. – John Rivera, Currency Analyst