The euro remained range-bound against the greenback yesterday following the release of flat German IFo business climate index data for May. There were no other major economic releases yesterday. Overall, the EUR/USD traded in a narrow range of 1.0848 to 1.0867 in the past 24 hours.
According to the data published by the IFo Institute, the German IFo business climate index inched down to 89.30 in May from 89.40 in the previous month, missing forecasts of 90.40.
The situation index fell to 88.30 in May from 88.90. However, the expectation index increased to 90.40 from 89.70.
Specifically, in the case of the German manufacturing sector, the business climate index improved to -6.20 in May from -8.60 in April. The reported figure reflects the third successive increase in a row. Companies expressed significantly greater satisfaction with their current business conditions. Moreover, the outlook for the upcoming months was less pessimistic compared to the previous month. Despite this improvement, the order backlog continued to diminish.
The service sector fell to 1.80 from 3.20. This was attributed to somewhat less favorable evaluations of the current business situation. However, there was a slight improvement in expectations, and companies reported receiving additional orders.
Concerning the trade sector, the business climate index improved to -16.90 in May from -22 in April. The business outlook improved significantly, albeit with a bit of caution. The assessment of the current situation also improved, a trend-led mainly by the wholesale sector.
In the construction sector, the business climate index inched up to -26 in May from -28.90 in April. Optimism prevailed among firms about the current business situation. The expectations of companies were less pessimistic. A dearth of orders, nevertheless, remains a key problem.
Notably, the German economy grew by 0.20% q-o-q in March 2024, after contracting by 0.50% in December 2023. The reported figure met the market’s expectations.
The growth was mainly led by a 1.20% q-o-q increase in gross fixed capital in the first quarter after a 2.10% decline in the previous quarter, mainly due to a robust rise in investments in construction.
Exports grew by 1.10% q-o-q in 1Q 2024 after declining by 0.90% in 4Q 2023. Likewise, imports rose by 0.60% after falling by 1.60%. On the contrary, private consumption and government spending both decreased by 0.40% q-o-q in the March 2024 quarter.
On a y-o-y basis, Germany’s GDP inched down 0.20% in the March 2024 quarter, unaltered from the previous quarter.
The flat German IFo business climate index is expected to keep the EUR/USD pair range-bound in the near term.
The historical price chart indicates that the EUR/USD pair is ascending after consolidating at 1.0765. The next resistance is anticipated to be only near 1.0900. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic indicator is in the bullish zone. Therefore, we anticipate the EUR/USD pair to remain in an uptrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
