The improvement in the business climate in Germany stalled in May, according to data published by Ifo. The index remained at the same level of 89.3 as the previous month. The gauge last rose in May last year, but analysts on average expected a further rise to confirm the more positive PMI reading released last week.
Although markets were slow to react to this release, this probably explains the euro's weaker performance against its major peers. has retreated below 1.0850, while testing the 0.8500 level. The latter pair has not traded persistently lower since August 2022.
The steady decline over the past two weeks is mainly due to the belief that the Bank of England will extend the pause before the rate cut cycle begins and that the ECB will ease policy at its next meeting on June 6.
If the support at 0.8500 does not hold, the next closest support will be the area of 0.8250-0.8300, but one must be prepared so that the decline does not stop there.
The FxPro Analyst Team
