EURUSD Price Shrugs Off Weak German IFO Data, Risks Lie Ahead
Euro and German IFO data:
- German Ifo business climate indicator hits a 27-month low.
- EURUSD retail net-short positions soar.
EURUSD Ignores Weak German Business Survey
The German economy faces a ‘lean festive season’ according to Clemens Fuest, President of the Ifo Institute with manufacturers’ business expectations turning negative for the first time since May 2016. This recent data adds further credence to ECB President Mario Draghi’s latest commentary that the EU economic slowdown is ‘not just down to one-offs’, all at a time when the ECB is finishing its quantitative easing program. The Ifo release follows on from last Friday’s weak German and Eurozone PMI readings which all fell from last month and missed market expectations.
German Ifo Data (December 18, 2018)
Eurozone and German Preliminary December PMIs (December 14, 2018)
EURUSD shrugged of the latest data, aided in part by a weaker US dollar, but doubts persist that the latest uptick is sustainable based on Eurozone data alone. With the ECB ending bond purchases at the end of this month, monetary conditions will tighten marginally at a time when inflation remains below target and growth continues to falter. Add into the mix the latest Italian and French debt-to-GDP discussions and the ongoing Brexit negotiations, and the Euro may struggle to push further ahead, based on its own valuation.
EURUSD Daily Price Chart (April - December 18, 2018)
IG Client Sentiment Data show that investors are currently 49.1% net-long EURUSD. Net-longs have decreased sharply since yesterday by 17.2% while net-shorts have increased by 50.1% since Monday.The combination of current sentiment and recent changes give us a strong EURUSD bullish contrarian bias.
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