Euro at Risk of Deeper Losses if German IFO Data Underperforms

The Euro may decline further if the German IFO business confidence gauge falls short of expectations, stoking ECB interest rate cut expectations.

Talking Points

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  Euro at Risk of Deeper Losses if German IFO Data Underperforms
  


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  NZ Dollar Gains on RBNZ Outlook, Yen Sold as Risk Appetite Firms
  

The German IFO Survey of business confidence headlines the economic calendar in European hours. Expectations call for the headline Business Climate gauge to edge narrowly lower in April. Eurozone news-flow has increasingly underperformed relative to consensus forecasts in the last two months however, hinting economists are underestimating the severity of recession in the region and opening the door for a downside surprise. Such an outcome threatens to weigh on the Euro, mirroring yesterday’s response to soft PMI data as traders build out ECB rate cut expectations at next week’s policy meeting.

The New Zealand Dollar outperformed in overnight trade after the RBNZ signaled it intends to keep the benchmark interest rate unchanged through the remainder of the year. The Australian Dollar briefly spiked lower after first-quarter CPI data fell short of expectations, putting the year-on-year inflation rate at 2.5 percent compared with 2.8 percent expected. The Japanese Yen underperformed as risk appetite firmed across Asian exchanges, boosting demand for carry trades funded in the perennially low-yielding currency.

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— Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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Euro at Risk of Deeper Losses if German IFO Data Underperforms