The IFO leads to the growth of the Euro
The IFO survey issued recently caused the sharp growth of the Euro in relation to the USD. The business climate index provided in the IFO survey experienced a growth reaching 103.5 point instead of 101.9 predicted by the experts. Such trend reflects the situation at the German Business market that seems to be quite stable at the moment. According to the Capital Economics official Jennifer McKeown the growth of the IFO did not compensated the previous month decrease in full but it improved anyway.
However the previous German key data (ZEW survey) turned to be quite below the expectations and decreased to –41.4 points throughout the current month. So considering these opposite numbers we can suppose that the investors dealing at the forex are quite worried about the economic forecast and the businesses pay less attention to it.
According to McKeown the German GDP is expected to decrease further and from this point of view this survey supports the idea that the decline will not be a significant one.
Moreover we should mention here the situation with inflation at the currency market that was affected by the oil price reached the point of $130 a barrel.
Decrease of the inflation leads to the markets of Euro and the British pound to be plumping for currencies. Euro and pound increased in relation to the USD. The ECB has already faced the necessity of interest rates decrease but it is not going to execute it.
The oil and Euro/USD correspondence increased throughout the last years caused by the dogmatic policy performed by the European Central Bank’s officials. So the growth of the oil prices now causes the close attention to the minutes of the FOMC’s last meeting. According to the West LB analyst the reason of it relates to the fact that there was a quite definite opinion throughout the recent weeks that there will be a pause in the US rate cuts. The last time the Fed cut interest rates by 25 bp and expressed the intention to keep such level for a certain period of time.
It becomes more obvious when comparing the USD situation with the British one where the British pound kept its positions in relation to the USD but decrease against the Euro after the Bank of England minutes concerning interest rate decision were issued.
