German Business Sentiment Boosts in December

It is a relatively morning for the EUR/USD on the economic calendar. However, the German economy was in the spotlight, with business sentiment figures for December in focus.

In December, the German Ifo Business Climate Index rose from 86.4 to 88.6. Economists forecast an increase to 87.4.

According to the December survey,

• Firms gave a better assessment of their current situation, with companies having a marked improvement in their outlook.
• The Current Assessment Index climbed from 93.2 to 94.4, with the Business Expectations Index jumping from 80.2 to 83.2.
• In manufacturing, the business climate index improved in almost all areas of manufacturing, with the services sector seeing a marked improvement.
• In trade, the index rose to its highest level since June. Firms assessed their current situation as positive for the first time since August.

The Ifo numbers followed the prelim December private sector PMI numbers on Friday. According to the December Composite PMI survey, sentiment improved across the private sector, turning positive at the end of the year.

EUR/USD Price Action

Ahead of today’s Business Climate numbers, the EUR/USD fell to an early low of $1.05821 before rising to a high of $1.06480.

Following hawkish Fed chatter on Friday, sentiment towards the Fed and the dollar shifted this morning, providing pre-stat support. However, the pair remains susceptible to another pullback on hawkish FOMC member commentary.

Following Thursday’s monetary policy decision and projections ECB member commentary also drew interest. ECB member Luis de Guindos spoke today, supporting further rate hikes.

In response to the German Ifo Business Climate Index and sub-component numbers, the EUR/USD rose to a post-stat high of $1.06580 before falling to a post-stat low of $1.06166.

At the time of writing, the EUR was up 0.40% to $1.06268.

Up Next

It is a quiet day ahead for the dollar. House price figures for December will be in focus. With recession fears resurfacing and mortgage rates elevated, a fall in the NAHB Housing Market Index could weigh on riskier assets.

Falling house prices would put the sector under more pressure to dampen consumer confidence, which could fuel fears of a recession.

Following last week’s hawkish Fed interest rate hike, investors will need to monitor FOMC member chatter.