No Respite for Euro as German Ifo Index Misses Expectations
EUR price, Ifo index analysis:
- The business climate index published by Germany’s Ifo Institute rose again in September but missed the consensus forecast of economists.
- That adds to concerns about the economy in Europe, where there are fears of a second wave of the coronavirus pandemic.
- With the US Dollar still benefiting from its role as a safe haven, EUR/USD will likely continue to weaken, perhaps after a modest near-term bounce.
Ifo Index adds to downside pressure on EUR/USD
The Ifo Institute’s business climate index for Germany rose again in September but came in below the consensus forecast of economists polled by the news agencies. That has added to the downward pressure on EUR/USD, which is already suffering from US Dollar strength as investors shun risky assets in favor of the safe-haven Greenback.
Moreover, concerns are rising about the state of the economy in the Eurozone, where there are fears of a second wave of coronavirus infections. That suggests more weakness ahead for EUR/USD, although after its slide over the past week a near-term bounce cannot be ruled out.
EURUSD Price Chart, One-Hour Timeframe (September 21-24, 2020)
Chart by IG (You can click on it for a larger image)
The Ifo data contrasted with Tuesday’s purchasing managers’ indexes for Germany in September that showed a larger than forecast rise in the ‘flash’ index for the manufacturing sector but an unexpected drop in the services index and a worse than expected fall in the composite measure.
Nonetheless, German industry is recovering and its export expectations have improved significantly, according to Ifo economist Klaus Wohlrabe. He told the Reuters news agency that rising coronavirus infection rates are hurting sentiment in the service sector, especially in tourism, but Brexit and the forthcoming US election have not yet had an impact on German business.
--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
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