24.09.202613:15 Forex Analysis & Reviews: Solid Ifo print from Germany fails to lift euro

Germany's Ifo business climate index rose to 89.9 in September from 88.8 in August, marking a fourth consecutive month of recovery. The report said firms assessed current business conditions more positively and that expectations improved again — a development Ifo President Clemens Fuest described as a continuing recovery in the German economy. The euro initially rallied on the print but lacked staying power. Markets quickly resumed selling, and the decisive factor was not the German data itself but the persistent strength of the US dollar.

Looking into the report, manufacturing improved again, thanks to markedly better expectations, especially in electrical equipment, even though firms rated current conditions slightly worse and remained unhappy with order books. The auto sector, as Ifo put it, is still navigating a difficult stretch — the sector balance improved to -2.8 in September from -4.2 in August, but remains deeply in negative territory. The key takeaway is as follows: the greater the auto sector lags the rest of the industry, the weaker the case for a full recovery in Germany's export core, even if the headline index improves. Services, by contrast, returned to positive territory, and trade indicators rose. Construction was essentially flat.

All of this suggests the survey points to a genuine, gradual exit from an extended weakness rather than a mere technical bounce. Yet the euro's muted response is telling: the data is objectively good and fits the broader acceleration in eurozone growth seen in September PMIs, but the currency could only hold gains briefly. The market is evaluating not the absolute quality of German statistics but whether they can outweigh strong US data and the Fed's hawkish rhetoric — and this modest Ifo improvement was not enough. In that mix, the dollar remains the dominant factor for the pair. Until the gap in economic momentum and central bank rhetoric across the Atlantic narrows, even positive German surprises risk being short?lived episodes in EUR/USD rather than a structural reversal.

In my view, a fourth month of steady Ifo improvement, together with September PMI prints, is gradually strengthening the eurozone's fundamental picture. But that has not yet translated into durable euro support versus the dollar. If this dynamic continues for another one to two months, the market may start to price it into the currency more consistently. For now, however, dollar strength is the deciding factor and German data play a secondary role.

EUR/USD technical outlook

Buyers should consider taking 1.1615. Only that would open a test of 1.1630. From there, a move to 1.1650 is possible, though getting there without support from major players will be difficult. On the downside, I expect significant buyer interest only around 1.1600. If bids are absent there, wait for a new low at 1.1580 or consider buying at 1.1560.

GBP/USD technical outlook

Pound buyers need to capture immediate resistance at 1.3530 to target 1.3565. Breaking above that will be challenging, with 1.3585 as the next extended target. On the downside, bears will try to seize control at 1.3495. A break below that level would deal a serious blow to bulls and could push GBP/USD to 1.3474 with scope to trade down to 1.3457.