The Euro has declined against all of its major peers as data revealed that business confidence in Germany declined for a second-month in a row in April, further raising the possibility for the European Central Bank to cut interest rates.
According to the Ifo institute in Munich its business climate index dropped from 106.7 in March to 104.4 in April. Economists had been forecasting only a slight decline to 106.2. The fall marks a four-month low. The Business Expectations Index, which measures attitudes toward business prospects over the next six-months, declined to 101.6 in April from 103.6, missing expectations for a reading of 103.0.
The decline in production in Europe’s largest economy is being blamed on the coldest March in 25 years. Growth has been badly affected and the economy now faces the very real possibility that it entered recession in the first quarter of the year. Mario Draghi the President of the European Central Bank said that he has not seen any signs of improvement and hinted that he might cut interest rates if the region’s economy continues to falter.
As a result of the data release the Euro fell sharply against the US Dollar, with the EUR/USD currency pair declining by 0.28%. Against the British Pound it declined by 0.26%.
The Euro could see some support later in the day if the re-elected Italian President Napolitano chooses the nations next Prime minister. The frontrunners are thought to be former PM Giuliano Amato and the deputy leader of the Democratic Party Enrico Letta.
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