German Ifo Business Climate Index Rises to 89.4 in April

On Wednesday, April 24, the German economy was in the spotlight, with business sentiment in focus.

German Ifo Business Climate Index

The German Ifo Business Climate Index increased from 87.8 to 89.4 in April. Economists forecast an increase to 88.9.

According to the April survey,

• In April, the Ifo Current Situation Index increased from 88.1 to 88.9, with the Expectations Index up from 87.7 to 89.9.
• The all-important services sector saw business sentiment improve further, rising from 0.4 to 3.2.
• Business sentiment across the manufacturing sector continued to recover, with the sub-index climbing from -9.9 to -8.5.
• The trade and construction segments also saw improving sentiment. Nevertheless, the firms across the two segments remained very pessimistic overall.

Business Sentiment Impact on Expectations of a June ECB Rate Cut

Business sentiment across the manufacturing and services sectors aligned with expectations of an improving macroeconomic environment.

Nevertheless, the April figures will unlikely impact investor bets on a June ECB interest rate cut. The headline Business Climate Index remained below levels in March and April 2023.

Notably, sentiment across the Services sector was optimistic, signaling a similar message to the recent German HCOB Services PMI numbers. The services sector accounts for approximately 70% of the German economy and influences inflation.

In April 2023, the Services Business Climate Index stood at 6.6 compared with 3.2 in April 2024.

EUR/USD Reaction to German Ifo Business Climate Survey

Before the release of the German Ifo Business Climate survey, the EUR/USD rose to a high of $1.07142 before falling to a low of $1.06859.

In response to the Ifo Business Climate survey, the EUR/USD rose to a high of $1.06925 before falling to a low of $1.06873.

On Wednesday, April 24, the EUR/USD was down 0.11% to $1.06889.

Up Next

ECB Executive Board members Anneli Tuominen, Elizabeth McCaul, Isabel Schnabel, and Piero Cipollone are on the calendar to speak. Reactions to the better-than-expected Services PMIs and views on the timing of interest rate cuts need consideration.

Moreover, investors should focus on US economic indicators later in the session. US core durable goods orders will warrant investor attention. Economists forecast core durable goods orders to increase by 0.3% in March after rising by 0.5% in February.