German Busines Confidence Drops On Higher Credit Costs and Slowing Growth

Daily Forex Fundamentals | Written by DailyFX | Jul 24 08 08:26 GMT |

The July German IFO business indicator fell to 97.5 from 101.3 the month prior, as rising inflation, higher interest rates and a slowing global economy weigh on business leaders. It was the lowest reading in almost three years for the survey of 7,000 executives. The ECB raising their benchmark rate to 4.25% at their last policy meeting has increased credit costs for business that are already dealing with rising energy and raw material prices. Additionally, the strength of the Euro has led to European exports becoming less competitive in the global marketplace. Fears are that the central bank will continue their tightening bias as they try and adhere to their price stability mandate. ECB member Klaus Liebscher stated in a recent interview that the development of inflation is a cause for concern and that everything needs to be done to avoid the second round effects. Meanwhile, the regions economy continues to show signs of slowing down as the PMI composite fell to 47.8 from 49.3, the lowest level since March 2006. The downside risks of the economy may keep the MPC from a rate hike in the near term, especially with oil prices easing. If inflationary elements continue to abate, the next move for President Trichet may be to actually cut rates as slowing growth becomes a significant risk. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.