Global macro overview for 24/04/2018

The Ifo index fell in April to 102.1 points against 103.2 points (after revision) a month earlier. This indicator fell for the fifth month in a row, signaling a slowdown in growth in the German economy. The Ifo index is an indicator measuring the mood of German managers and is considered as a leading indicator of the economic situation in the largest economy in Europe.

It is worth noting, however, that in April the method of calculating the Ifo index changed. After the changes, the result for March was revised down from 114.7 points. up to 103.3 points. The main change consists in adding a service sector to the study. Previously, Ifo conducted research only among managers of industrial, construction and commercial companies. Secondly, the data aggregation method has been modified and the reference year has been changed. Thirdly, the sample size was increased - now the study is carried out on a group of approximately 9,000 enterprises, or two thousand more than it used to be.

After statistical modifications, April was the fifth consecutive fall in the Ifo index. Event the early reading in March suggested that the mood in German business is getting worse. In particular, the rapidly decreasing subindex of expectations was worrying, which was accompanied by a very high assessment of the current economic situation. In April, the mood of German financial experts also deteriorated. These may be the first symptoms of the economic slowdown in Germany after they experienced a boom phase last year. "The spirit in German business has deteriorated. The German economy slows down." wrote Ifo CEO Clemens Fuest. Despite the worse than expected data, not too many analysts are lowering economic forecasts for Germany just yet. The International Monetary Fund estimates this year's GDP growth at 2.5%.

Let's now take a look at the German DAX Index technical picture at the H4 time frame. Lower than expected and surprisingly low (if someone did not know about changing the methodology for its preparation) the Ifo index led to a significant weakening of the Euro against the Dollar, but the DAX index seems to be quite content with the results anyway. The market is trading just at the recent swing high at the level of 12,641 after a bounce from the technical support at the level of 12,464. Nevertheless, the weak momentum and overbought market conditions are indicating a possible termination of this short-term rally.

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