German IFO Business Climate Falls – EUR/USD Dips Another

The highly regarded German Ifo Business Climate dropped significantly to 106.9, 3 points lower than last month, reversing all the gradual gains seen previously. Expectations were for a marginal slide of 0.3 points.

EUR/USD reacts by dropping below another support line.

Euro/dollar is now dipping below support at 1.2520. This isn’t a strong support line, but still another leg down for the battered common currency. Update: the pair managed to creep above this line after the initial fall.

Also the other figures released by IFO disappointed: the Current Assessment dropped from 117.5 to 113.3 points (no change expected). The IFO Expectations dropped from 102.7 to 100.9. A smaller slide to 102 was predicted.

IFO is Germany’s No. 1 Think Tank, yet it publishes its data after the ZEW institute, which also showed a disappointing drop in the economic sentiment.

Earlier, German manufacturing PMI badly disappointed by falling to 45 points. It followed a deeper fall in French manufacturing PMI. EUR/USD reacted by testing new 22 month lows and fell to 1.2535 – not too far from lows seen yesterday.

The purchasing managers’ indices for the whole euro-area fell short of expectations as well, but this wasn’t a big surprise after French and German figures fell short: manufacturing dropped from 45.9 to 45 (46.1 was expected). Services slid from 46.9 to 46.5, while no change was predicted. Germany sets the tone in the PMIs.

For more on the euro, see the EURUSD forecast.

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