Germany’s IFO Business Climate Index for January Weighs on the EUR

German Business Confidence

In January, business sentiment waned in Germany, with the ifo Business Climate Index falling from 92.2 to 90.1. Economists had forecast a more modest decline to 91.8.

According to the January report,

• After 8 consecutive rises, the manufacturing index fell from 1.4 to -3.0 in January. The decline was attributed to less optimistic expectations amongst manufacturing firms.
• In spite of the COVID-19 pandemic, assessments of the current situation were better.
• For the service sector, the business climate indicator fell from -0.4 to -4.4. Firms were both negative towards the current situation and more pessimistic about the coming months.
• The trade business climate indicator took the biggest hit, however, tumbling from 0.3 to -17.2. There was a marked deterioration in both the current situation and towards the months ahead.

Looking at the sub-indexes:

The Business Expectations sub-index fell from 93.0 to 91.1, with the Current Assessment sub-index declining from 91.3 to 89.2.

Economists had forecast the Business Expectations sub-index to climb to 93.2 and the Current Assessment sub-index to fall to 90.6.

Market Impact

Upon release of the figures, the EUR slid from $1.21730 to a current day low $1.21485 before finding support.

The DAX30 slipped into the red before finding support. A 0.08% fall into the red was minor, however, with the markets having anticipated a deterioration in business sentiment.

In the 1 hour run up, the DAX30 had been up by 0.52%, while up by just 0.07% in the 30-minute run up to the release.

At the time of writing, the CAC40 was down by 0.11%, while DAX30 and the EuroStoxx600 were up by 0.08% and by 0.24% respectively.

Concerns over the prospects of further measures to contain the COVID-19 pandemic pegged the majors back.

Hopes of U.S stimulus and corporate earnings results provided some much-needed support, however.