Germany’s IFO institute is set to publish its business survey for March on Wednesday at 09:00 GMT, with forecasts indicating a decline in key indices: the IFO Business Climate Index is expected to fall to 86.1 from 88.6 in February, the Current Assessment Index to 86.0 from 86.7, and the Expectations Index to 86.0 from 90.5 [1]. These anticipated drops suggest a weakening business sentiment in Germany, which is significant given Germany's role as the largest economy in the Eurozone and its influence on the Euro's stability [1].
EUR/USD has been trading around 1.1600, with technical indicators showing neutral momentum; the 14-day RSI stands at 47, immediate support is at the nine-day EMA of 1.1578, and resistance at the 50-day EMA of 1.1672 [1]. Danske Bank notes that EUR/USD remains range-bound near 1.16 ahead of the IFO survey release, with euro area PMIs showing a mixed picture: the flash composite PMI fell to 50.5 in March from 51.9, driven by a sharp drop in services to 50.1 from 51.9, while manufacturing rose to 51.4 from 50.8, largely due to longer delivery times and higher input prices amid supply distortions from the war in Iran [2]. Manufacturing input prices surged to their highest level since September 2022, signaling rising costs, though output prices increased only modestly [2].
The ECB’s hawkish bias is highlighted by its focus on inflation risks, maintaining upward pressure on short-term EUR rates despite weaker growth signals [2]. Danske Bank points out that recent PMI readings in Germany showed weaker-than-expected services but stronger manufacturing, with both new orders and output rising—a positive sign for the sector. However, the decline in services and sharp rise in manufacturing input prices remain concerns [2].
Market implications discussed in both sources suggest that EUR/USD could remain subdued if the IFO survey data comes as expected, reflecting ongoing uncertainty and the Euro's challenges amid geopolitical tensions and ECB policy dynamics [1][2]. Upward pressure on EUR short-term rates persists due to hawkish ECB communication, but weaker growth signals temper optimism [2].
CONCLUSION
The upcoming German IFO survey is expected to show declining business sentiment, reinforcing concerns about Eurozone growth. While manufacturing data offers some positive signals, rising input prices and weaker services weigh on the outlook. The ECB’s hawkish stance supports EUR rates, but EUR/USD is likely to remain range-bound near 1.16 as markets await further clarity from German and Eurozone economic indicators.