Economics
Euro steady despite weak business confidence data
Germany’s Ifo Business Climate falls German GDP expected to stall in Q4 EUR/USD is drifting higher on Wednesday and is trading at 1.0781, up 0.11%. German…
- Germany’s Ifo Business Climate falls
- German GDP expected to stall in Q4
EUR/USD is drifting higher on Wednesday and is trading at 1.0781, up 0.11%.
German Business Confidence dips
Germany’s Ifo Business Climate for May fell to 91.7, following a downwardly revised 93.4 in April and shy of the estimate of 93.0 points. This was the first decline after a six-month expansion. Business expectations fared worse, dropping from 91.7 to 88.6 and missing the estimate of 91.9 points.
German businesses are worried about economic conditions for the next 6 months, with the banking turmoil in the US, a rocky Chinese reopening and a weak eurozone economy all weighing on sentiment. Manufacturers reported a steep decline in expectations, which is not surprising, given that manufacturing PMI readings continue to indicate persistent contraction.
The markets are expecting more soft data out of Germany on Thursday – GfK consumer confidence is expected to come in at -24.0 for June, following -25.7 in May. Germany’s GDP is projected at 0.0% in the fourth quarter, unchanged from Q3. On an annualized basis, fourth-quarter GDP is expected to remain unchanged at -0.1%. If GDP surprises to the downside, the euro could lose ground.
US debt ceiling remains at a standoff
Congress remains at a standoff over the debt ceiling, despite Treasury Secretary Yellen’s warning that the US could default as early as June 1st. Republicans have countered that Yellen is scaremongering with a made-up deadline. Still, even if the actual deadline is a week or two later, Congress seems to be playing with fire to score political points. Investors are jittery, and stock markets have fallen while safe-havens such as gold and the US dollar have benefited from the crisis. We’ve seen this movie before, and Congress has always reached a deal before the deadline. Still, we can expect risk sentiment to slide and the US dollar to gain ground if the impasse continues.
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EUR/USD Technical
- EUR/USD faces resistance at 1.0887 and 1.0969
- 1.0824 and 1.0742 are providing support
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