Forex »

Weakening In German Sentiment

James Boston
Share on StockTwits
Published on
Weakening In German Sentiment

Sentiment in the Eurozones largest economy is continuing to languish according to the German IFO indicators just released for the month of June. The IFO Business Climate number has taken a larger than expected fall this month to read at 109.7, this is down from the May figure of 110.4 and below the consensus estimate of 110.2.

The IFO Current Assessment number maintained the previous month’s reading of 114.8 but fell slightly short of the expected 115.0 level. IFO Expectations also missed the estimated 105.9 by printing a June figure of 104.8, this compares to 106.2 reading in May.

Despite this fall off in sentiment there are still plenty of reasons to be upbeat about the German economy. First quarter GDP growth came in at 0.8% which is enviable by Eurozone standards, predictions however are for a softer Q2 before a continued pick in the pace of expansion. Yesterday’s manufacturing figures failed to excite and this is evidence of what appears to be a short term plateau in the German recovery.

Low unemployment and low debt in this large and mature economy mean that the occasional quarter of moderate growth is unlikely to harm the path to recovery. On the contrary, given the ultra loose monetary policy being exhibited by the European Central Bank (ECB) and the potential for large scale quantitative easing shortly down the road, it may prove suitable for Germany to take a breather prior to any further stimulus taking effect.

A soft quarter from Germany also makes life a little easier for the ECB policy makers. It opens the way for a further loosening of policy. Germany had initiated some strong resistance to any potential large scale asset purchase program by the ECB, this included both political action and some legal action on obscure technical points of how the program may operate. However a German economy with capacity for growth may now accept a watered down version of quantitative easing.

Share on StockTwits

Iron FX 1.11156/1.11128 2.8
XM Markets 1.09948/1.09928 2
FxPro 1.10184/1.10171 1.3
FXCM 1.13943/1.13912 3.1