When is the German IFO Survey and how it could affect EUR/USD?
The German IFO Survey Overview
Germany’s IFO institute will publish its business survey for January on Monday at 09:00 GMT.
The headline IFO Business Climate Index is expected to tick higher to 88.1 this month, from a 87.6 reading in December.
The Current Assessment Index was at 85.6, while the Expectations Index was at 89.7 in December.
How could the German IFO Survey affect EUR/USD?
EUR/USD may remain subdued if the IFO Business Survey data comes out as expected amid increased safe-haven demand, still trading at a gap up. However, the Euro (EUR) may maintain its position as the Eurozone's PMI data pointed to a soft services sector in January, maintaining the outlook of unchanged rates by the European Central Bank (ECB). Earlier releases from Germany were more encouraging, as the Services PMI beat forecasts and remained in expansionary territory, while the Manufacturing PMI improved but stayed below the expansion–contraction threshold.
The EUR/USD pair loses ground as the US Dollar (USD) recovers its daily losses, supported by the increased risk aversion, which could be attributed to trade and geopolitical tensions. US President Donald Trump threatened to impose 100% tariffs on Canadian goods if Ottawa were to strike a trade deal with China. Canada’s Prime Minister Mark Carney said on Sunday that Ottawa has no plans to seek a free trade agreement with China. Trump also cautioned that a US aircraft carrier strike group is heading toward the Middle East as tensions with Iran intensify.
Technically, the EUR/USD depreciates after opening at four-month highs, trading around 1.1860 at the time of writing. However, the bullish bias prevails as the 14-day Relative Strength Index (RSI) is positioned at 69.00, suggesting stretched momentum. The pair may rebound toward a fresh four-month high of 1.1897, aligned with the psychological level of 1.1900. On the downside, the initial support lies at the nine-day Exponential Moving Average (EMA) of 1.1739.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
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