German IFO Falls To Three Year Low

German business confidence fell to 94.8 from 97.5, the three year low was far below the expected 97.2. Additionally, the outlook for the economy was significantly more disappointing as the 87.0 expectations reading was the lowest since February, 1993. Growth in the country contracted 0.5% in the second quarter and signs are now pointing to further contraction into the third. High inflation, declining demand from abroad and contracting domestic growth has weighed on sentiment. If the region’s largest economy continues to decline the ECB may be forced to abandon its price stability mandate and consider cutting rates in early 2009. – [I]John Rivera, Currency Analyst [/I]