- IFO Business Confidence Index 96.1; consensus forecast 95.1; prior 96.0 (revised)
- IFO Expectations index 93.4; consensus forecast 92.1; prior 92.9
- IFO Current Assessment 98.6; consensus forecast 98.6; prior 99.2 (revised)
This morning’s IFO data release saw upside surprises in all three readings. Being based on ~9000 survey responses from German firms in different sectors, the IFO reading is a leading indicator of any turning points in the German economy.
The current data does not provide evidence that the coronavirus has so far harmed German business confidence.
Though the rising expectations may seem like a bullish sign, the data is difficult to interpret at the moment. As coronavirus cases are spreading on a global level with more and more regions restricting travel and completely shutting down, financial markets are pricing in a severe shock at the beginning of this year.
Eurozone equities are falling faster than their global comparables, highlighting the eurozone’s sensitivity to global shocks.
The euro saw a brief breeze of strength against the dollar upon the build-up to the IFO reading but soon went back to flat on the day.
Looking ahead, the eurozone’s near term outlook remains grim: coronavirus fears are surging, last week’s sentiment data disappointed and USD is still looking strong despite the poor PMI reading. Tomorrow, German GDP data will be released at 09:00 GMT.
Chart 1: European equity markets soften on coronavirus
Chart 2: EURUSD briefly rising upon IFO release but immediately moving back to flat
Author: Ima Sammani, FX Market Analyst at Monex Europe.