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EUR/USD Rises Gently Despite Drop In German Business Confidence

EUR/USD Rises Gently Despite Drop In German Business Confidence

Martin Essex, MSTA,

Talking Points

- German business confidence fell unexpectedly in January, hitting its lowest level since September

- The Munich-based Ifo economic institute said its business climate index fell to 109.8 from 111.0 in December; the January reading compared with a consensus forecast of a rise to 111.3

- However, the news was shrugged off by traders in EURUSD, which climbed gently

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

German business confidence fell unexpectedly in January, according to Germany’s Ifo institute. It said its business climate index, based on a monthly survey of around 7,000 firms, fell to 109.8 from 111.0 in December rather than rising to 111.3 as expected by analysts.

“The German economy made a less confident start to the year” Ifo President Clemens Fuest said in a statement. Companies expressed greater satisfaction with their current business situation, but were less optimistic about their six-month business outlook, he added. Ifo’s current conditions index was in line with the consensus forecast, at 116.9, but its expectations index hit 103.2 rather than the 105.8 predicted.

Nonetheless, EURUSD edged higher in Europe Wednesday.

Chart: EURUSD 5’ Timeframe (January 25, 2017)

According to Ifo economist Klaus Wohlrabe, there has been no impact so far on German business sentiment from the first few days in office of US President Donald Trump. He said German firms were waiting for actions from Trump, not just words, and that nothing has yet been decided on protectionist measures. “There is no Trump effect seen in these numbers as export expectations have risen, even in the car industry,” he said.

Trump has warned German car companies such as BMW that he plans to impose a border tax of 35% on vehicles imported to the US.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

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