Euro rises after German consumer confidence improves

The euro has edged higher on Thursday. In the European session, EUR/USD is trading at 1.0726, up 0.25%.

German consumer confidence hits two-year high
Germany’s GfK Consumer Climate index improved in April and again in the May forecast, as the German consumer is showing signs of optimism. The index improved to a revised -27.3 in April, up from -28.8 in March and is expected to rise to -24.2 in the May forecast, above the market estimate of -25.9.

The May reading marks a two-year high but let’s not forget that consumer confidence remains deep in negative (pessimistic) territory. Consumer income expectations and economic prospects both rose but at the same time consumers are saving more and are cautious about spending due to uncertainty about the economy.

The improved consumer confidence reading comes on heels of German Ifo Business Climate index, which also is negative territory but improved in April from 87.9 to 89.4, a third straight increase. Confidence for consumers and businesses is pointing upwards as inflation has been falling and expectations are growing that the European Central Bank will cut rates as soon as June. The German economy, the largest in the eurozone, hasn’t returned to its glory days as the locomotive of Europe, but is showing signs that it has bottomed out.

The ECB Economic Bulletin, published on Thursday, provided a summary of the ECB’s stance. On inflation, the ECB noted that food and energy prices fell in March, but services price inflation remained high at 4%.Wage growth has also softened but tensions in the Middle East could push energy prices and boost inflation.

EUR/USD Technical

• EUR/USD is testing support at 1.0697. Below, there is support at 1.0649
• There is resistance at 1.0738 and 1.0786

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