German Business Confidence Rises from 26-Year Low

German April Ifo jumped to 83.7 from 82.1 in the previous month. We had been looking for a reading of 82.2 and our median was 82.3, so the result was much better than anticipated. The breakdown showed not only the expected improvement in the forward looking future expectations index to, but also a surprise rebound in the current conditions index. The latter climped to 83.6 from 82.7, the first improvement since October last year. The expectations index is at the highest level since September last year and all in all the improvement in the Ifo together with better than expected ZEW and PMI surveys confirms that confidence is bottoming out. Readings remain at low levels consistent with ongoing contraction in economic activity, but there are signs that growth will start to stabilize in the second half of the year.
Meanwhile, EUR-USD traded above 1.3220 offers after the German Ifo came in above expectation in April, with the headline at 83.7, while the current conditions index rose to 83.6. The expectations index also showed improvement to 83.9, which is indicative of stabilization in sentiment and follows the developing theme seen across other leading indicators. Euro was already in the ascendency amid a softer dollar backdrop ahead of U.S. bank stress tests and more positive Euro-Zone data, with French March consumer spending also pushing up 1.1% m/m. Stop losses were cleared out above 1.3200 just ahead of the release and the market will now look towards the 1.3250-65 area, where fresh supply is noted. Ifo’s Abberger said he hoped the ECB would cut by a further 25 bp and move to quantitative easing, adding that he still sees no turnaround and the situation remains difficult, although he added that the strongest decline should have already passed.