Business Sentiment Improves in Germany
EUR/USD
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Germany’s Ifo Business Climate Index improved in November, strengthening from 84.5 to 86.3 (85.0 was expected). The overall index rose following an improvement in expectations over the last two months.
Ifo Business Climate Index chart.
We previously noted that the sharpest downturn may be over and that the situation will stabilize further, as was the case with Markit PMIs and the ZEW Indicator of Economic Sentiment.
The outcome of the Ifo index is encouraging for both economists and market participants. The same kind of reversal signaled the start of a period of economic stabilization after almost free-falling in both 2009 and 2020. These hopes for changes are also bolded by lowering energy prices, improved consumer expectations, and rising export volumes.
Global reversals in the Ifo sentiment index coincided with EUR/USD and many European stock indices hitting their cyclical lows. Improving business sentiment may provide additional reasons to remain confident in the single currency and to buy back at historically low levels.
