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The German Ifo business climate index surprised markets to the upside, suggesting that German businesses are brushing aside potential risks like Brexit, Trump or Le Pen. German Ifo business climate index for March came in at 112.3 points, its highest level since July 2011. Data beat analysts’ expectations for a slight rise to 111.1 for the month.
The boost to the headline index came from both components of the business climate index. Improvements were seen in the sub-indices for both current trading assessments and future expectations, which rose to 119.3 and 105.7 respectively. The trade and industry component rose to 17.4 from 15.0 with a strong gain in the manufacturing sector. Construction edged higher on the month with the current situation at the strongest level since 1991. Retail confidence was also higher, although there was a retreat in wholesaling after a surge seen last month.
Data follows last week’s PMI surveys, which suggested the German economy was in its best health for six years. Moreover, demand from the emerging markets has leapt in past months, after a general stagnation in the two years before. German businesses largely muted to risks from Brexit, Trump’s protectionism and the advance of anti-establishment forces in the eurozone. Upbeat Ifo business climate data adds to the evidence that euro zone's biggest economy is gaining momentum.
"German GDP should rise significantly in the first quarter; we anticipate a plus of 0.7% on the fourth quarter. For the full year in 2017, we expect a growth rate of 1.6%. Chancellor Merkel is gaining tailwind from this economic growth," said Commerzbank in a report.
EUR/USD was trading at 1.0876, up 0.74 percent at around 1200 GMT. Markets now await data from the European Commission which will publish a gauge for economic confidence in the 19-nation currency bloc on Thursday, and the European Union’s statistics agency will release March inflation data on Friday.
Technical studies are bullish and support further upside in the pair. The major finds stiff resistance at 1.0884 (200-DMA). Break above 200-DMA is likely to take the pair higher. We see next major resistance at 1.0950 levels (weekly 50-SMA). FxWirePro's Hourly EUR Spot Index was neutral at 18.1931. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.
