Euro Drops as German IFO’s Overshadowed by Norges Bank Rate Cut
- German firms expect better business situation in six months
- Norway’s Norges Bank unexpectedly cut interest rate to record low
The Euro lost -0.25% versus the US Dollar after Norway’s Norges Bank unexpectedly cut its main interest rate by 25-bps to a record low 0.75%. The surprise cut overshadowed the better than expected German IFO surveys and the dovish action fed into the deteriorating outlook for global growth.
The German Business Climate index rose to 108.5, above the expected 107.9 (the further the value is from 100, the stronger the sentiment), whilst the Current Assessment came in at 114.0, below the expected print of 114.7. The market has its attention on the Expectations index, where the queried firms and business leaders are asked to forecast the business environment six months down the line. The expectations index rose to 103.3, above the expected 101.4, suggesting a strengthening German Economy.
After yesterday's neutral PMI numbers from the Euro-Zone, and ECB President Mario Draghi reaffirming the ECB's ability to expand its asset purchases duration and quantity, this latest release may help with the ECB's deteriorating inflation outlook.
EURUSD’s initial rally to test the $1.1225 level was short lived, with the Norges Bank decision and earlier dovish comments from ECB’s Liikanen putting a halt on the move, both signaling global growth concerns.