Forex: EUR/GBP: German Ifo Business Climate at 2½ year high

on Jan 27, 2014
Updated: Oct 21, 2019
Listen Monday, January 27th:_ The German Ifo Institute for Economic Research has today released its Business Climate, Current Assessment and Expectations Indexes for Germany, all of which recorded a rise this month.

The Ifo Business Climate Index rose for the third month in a row and beat expectations in reaching its highest level since July 2011 at 110.6 points from the prior 109.5. The measure derives from a survey of 7,000 German companies in the manufacturing, construction, wholesale and retail sectors and records sentiment for business prospects over the next six months.

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“Manufacturers assessed their current business situation far more favourably,” the Ifo statement said, adding that “wholesalers were far more satisfied with their current business situation”. The statement also noted that retailers were “somewhat more optimistic about future business developments” while “the business climate index in construction continued to rise”.

The Current Assessment Index grew to 112.4 this month from 111.6 in December while the Expectations Index increased to 108.9 from 107.4.
ING senior economist Carsten Brzeski noted that “German businesses remain die-hard optimists” and observed that 2013 growth “was much weaker than soft indicators had suggested”, with “this dichotomy worsen[ing] towards the end of” the year. The result was “an unexpected disappointing growth performance despite a new acceleration of sentiment indicators”.

Brzeski thinks though that strong fundamentals still make a “compelling case for a strong growth performance of the German economy this year”.
Absent a deterioration in emerging market economies, “the German growth conundrum should automatically end in the coming months,” Brzeki believes.

The UK economy is on track to record its best calendar-year growth since 2007, with forecasts that Gross Domestic Product expanded 0.7 percent in the fourth quarter of 2013, keeping growth close to the 0.8 percent rise reported in the previous quarter. The official results are scheduled for tomorrow and if they coincide with the projections, it will be the first year since onset of the global financial crisis in which UK the economy has expanded in each quarter of the year.
Bank of England governor Mark Carney reiterated over the weekend that he wants the combination of low interest rates and financial incentives to continue for some time, to give further impetus to the UK’s uneven growth to date. The BoE’s Monetary Policy Committee expects business investment to log a recovery in consumer spending and other measures and forecasts are for this to happen later in the year.
The EUR/GBP thus far today has been trading within the range 0.8304 to 0.8255 and is currently at 0.8259.
Today’s resistances: 0.8315, 0.8325 and 0.8350.
Supports: 0.8285, 0.8265 and 0.8250.


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