The decline of 11% in the euro to around 1.20 against the US dollar from 1.35 at the end of last year seems to have boosted business confidence in Germany and Italy. Business confidence in Italy and Germany rose for the second month in July to five month highs. In Italy, the ISAE (Institute of Studies and Economic Analyses) index of business confidence rose 1.3% from June to July, but was still 5.1% below July of last year. The IFO (Institut fur Wirtschaftsforschung) index in Germany rose 1.8% from June to July and was only 0.5% below July, 2004. Business confidence in Italy is some 14% below 2000 while that of Germany is only 5% below 2000. The first chart shows the business confidence indexes for Germany and Italy.

The 9% decline in the British pound from $1.92 at the end of last year to around $1.75 currently may also have accounted for the improvement in confidence shown in the CBI (Confederation of British Industries) Industrial Trends Survey. As in Italy, the improvement is from a low level. The balance of respondents reporting on the volume of their order books rose to a negative 20 from a negative 25 from June to July. Despite the decline of the euro, business confidence in the Netherlands continued to weaken. In July pessimists in the Netherlands out weighed the optimists by 3.7% a 2 point increase from the 1.7% in June. The second charts shows the percent balances for the U. K. and the Netherlands.