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Euro Rallies Despite Weak IFO But 1.4450 Could Cap

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The news suggests that growth in Germany may slow in Q3 of this year as dampening of global demand begins to weigh on the export driven economy. Klaus Abberger IFO's Survey coordinator noted that the slowdown in the economy is quite significant, although he thought that talk of the recession was premature. He further stated that the tightening monetary policy by the ECB was extremely damaging to business sentiment especially at a time of turbulence in capital markets and urged the central bank to adopt a more neutral posture going forward.

The EUR/USD dropped to 1.4385 in the aftermath of the release but quickly recovered popping to 1.4450 on talk of ECB buying of Italian bonds and further Chinese demand for the unit. However, the pair may find it difficult to rise much above the 1.4450 level for the rest of the day unless risk flow turn decidedly positive. The economic message from the IFO results is that growth in Q3 may turn negative given the slowdown in global demand and very tepid consumption at home. Under such conditions the ECB will find it increasingly difficult to maintain its tightening stance on monetary policy and that dynamic should cap any rally in EUR/USD.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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