Euro Leaps to 4-Month High on Improving German Business Climate, Weaker Dollar

The euro rallied on Monday to its highest level in four months as the U.S. dollar fell to its lowest rate in 2017. Additionally, the euro was also boosted by a better-than-expected German Ifo Business Climate reading for March, which came in at 112.3 points - a net gain of 1.2 points over previous month’s reading of 111.1.

According to the press released by the Ifo Institute, this is the highest monthly reading since July of 2011.

Ifo Institute President Dr. Clemens Fuest said the index for the manufacturing sector also rose to its highest level since July of 2011, “This very positive development was partly driven by a renewed upturn in demand. Prices continued to follow an upwards trend. The index rose in nearly all key segments of manufacturing.,” he added.

While the report showed improvements in the current bussines situation and future expectations of the retail and construction sectors, it also highlighted the declines in the wholesaling sector:
“After last month’s sharp increase, the business climate index in wholesaling deteriorated.”
In the hours following the report, the EUR/USD exchange rate rose to a 4-month high of 1.09058. The rise was also fueled in large part by the declining U.S. Dollar Index, which hit a 20-week low of 98.86 on Monday.

Although the euro was trading at a 4-month high against the dollar at 9:00 a.m. EST, by 4:00 p.m., the EUR/USD exchange rate was back down to levels prior to the Ifo Business Climate news, giving up most of the gains for the day:

Euro banknotes photo by Images Money