Disappointing German IFO Survey Fails to Distract Euro Traders from Cyprus

By Benjamin Spier 22 March 2013 09:43 GMT THE TAKEAWAY: IFO business climate survey falls to 106.7 in March, following a 10-month high -> Bundesbank predicts economic growth in the current quarter -> Euro trading remains focused on Cyprus

The IFO German business climate survey declined for the first time in five months in March, after reaching a 10-month high in February. The business climate survey was reported at 106.7, disappointing expectations for 107.8 and down from 107.4 in the previous month. The IFO current assessment survey unexpectedly fell to 109.9 from 100.2 in February, and the IFO expectations survey fell to 103.6 from 104.6.

The results are based on IFO surveys of German firms, and the main business climate survey has not fallen below the neutral 100.0 point in three years.

The German economy is the Euro-zone’s biggest economy, and also one of the best performers through the Euro-zone debt crisis. The German GDP declined 0.6% in Q4, but the Bundesbank has predicted the country will see economic growth in the current quarter. Signs of further weakness in German economic growth are Euro negative.

That is why the Euro declined nearly twenty points and below 1.2900 against the US Dollar following the disappointing release. However, the Euro has recovered all those losses, as single currency traders remained focused on the Cyprus crisis. EUR/USD may now be seeing resistance at 1.2920, by a long term downward trend line from November 2011. A 200 day moving average may provide support around 1.2870.

EURUSD Daily: March 22, 2013

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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22 March 2013 09:43 GMT

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EUR/USD Slips Under $1.2900 after Big Misses on Euro-zone, German PMIs

THE TAKEAWAY: EUR Euro-zone, French, and German PMI data for March disappoints across the board, signaling steeper recession which is likely to continue through 3Q’13 > EURUSD BEARISH

The worst economic slump since the depths of the global financial crisis in 2008-2009 looks set to continue in Europe, as the core regions begin to feel the brunt of the slowdown. The preliminary March PMI figures out of France, Germany, and the broader Euro-zone all disappointed across the board, with all but one – German PMI Services – holding in or falling back into contraction territory. The headline figures are as follows:

- 04:00 EST/08:00 GMT: EUR French PMI Manufacturing (MAR P): 43.9 vs 44.2 expected, from 43.9.

- 04:00 EST/08:00 GMT: EUR French PMI Services (MAR P): 41.9 vs 44.0 expected, from 43.7.

- 04:30 EST/08:30 GMT: EUR German PMI Manufacturing (MAR A): 48.9 vs 50.5 expected, from 50.3.

- 04:30 EST/08:30 GMT: EUR German PMI Services (MAR A): 51.6 vs 55.0 expected, from 54.7.

- 05:00 EST/09:00 GMT: EUR Euro-zone PMI Composite (MAR A): 46.5 vs 48.2 expected, from 47.9.

- 05:00 EST/09:00 GMT: EUR Euro-zone PMI Manufacturing (MAR A): 46.6 vs 48.2 expected, from 47.9.

- 05:00 EST/09:00 GMT: EUR Euro-zone PMI Services (MAR A): 46.5 vs 48.2 expected, from 47.9.

Needless to say, the data flies in the face of commentary provided on March 7 by European Central Bank President Mario Draghi, in which he made clear that the central bank believes that growth will return to the region “later in the year,” despite he himself downgrading the 17-nation currency bloc’s growth forecasts for 2013 and 2014.

EURUSD 1-minute Chart: March 21, 2013

Charts Created using Marketscope – Prepared by Christopher Vecchio

The EURUSD has traded quite negatively following the release of the French PMIs at 04:00 EST/08:00 GMT (it is worth noting that the releases came out two minutes early across the board). The EURUSD touched a session high of 1.2949 ahead of the round of PMIs, with a fresh session low established at 1.2879 after the release of the broader Euro-zone figures. Price has since recovered to 1.2913, at the time this report was written.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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