The euro fell slightly on Wednesday. In European trading, EUR/USD was trading 0.16% lower at 1.0685.
Germans are showing signs of optimism
Germany's Ifo Business Conditions Index in April was 89.4, up from 87.9 in March and also exceeding market expectations of 88.9. Although the index remains in negative territory (100 separates pessimism from optimism), there are optimistic signs that the eurozone's largest economy may have hit bottom.
This figure marks the third consecutive increase, which in the past has signaled that the German economy has turned a corner.
Business confidence is now at its highest level since May 2023, boosted by falling inflation and expectations that the European Central Bank will cut interest rates soon. Although the German economy is not yet out of crisis, improving business confidence is a positive sign.
Eurozone PMI – services up, manufacturing down
The April PMI for the euro area and Germany showed a mixed picture of economic activity, with services improving but manufacturing declining. The euro area services sector PMI stood at 52.9, improving from 51.5 in March and beating market expectations of 51.8. The manufacturing PMI fell from 46.1 to 45.6, lower than the market estimate of 46.5.
Germany's services PMI turned to growth after eight consecutive quarters of decline, rising from 49.8 to 53.3, beating market expectations of 50.6. Although the manufacturing sector remains mired in contraction, this is another sign of improvement in the German economy.
Will the ECB implement a series of rate cuts?
The ECB has indicated it will start cutting rates in June, but what will happen after that is less clear. ECB President Lagarde has not disclosed the central bank's plans beyond June. Some board members were more outspoken, saying they supported further cuts through the end of the year. Although some members have stated that there is no problem with three rate cuts this year, the market is not convinced that the ECB will be that aggressive and has no longer fully priced in three rate cuts this year. not present.
EUR/USD technical
- There is resistance at 1.0729 and 1.0757
- EUR/USD is testing support at 1.0684. Below, 1.0656 is supported.
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