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Drop in German IFO worrying sign for Eurozone’s biggest economy - ING

FXStreet (Łódź) - Carsten Brzeski from ING believes that the fifth consecutive decline in German business confidence in September suggests that Eurozone's largest economy is dangerously close to falling into a longer-lasting almost- stagnation.

Key quotes

"Germany's most prominent leading indicator, the Ifo index, just decreased to 104.7, from 106.3 in August. Both the current assessment and the expectation component slowed down."

"The German economy is currently split in two: a strong domestic economy, backed by record-high employment, gradually increasing wages and a booming construction sector, and at the same time a stagnating external part."

"While the German service sector is booming, manufacturing is treading water, as also indicated by yesterday’s PMI data."

"Increased geopolitical tensions and weakening emerging market economies, including China, are taking a toll on German exports."

"Moreover, the industrial safety net of low inventories and richly filled order books has started to narrow in recent months."

"Lower external demand has however also started to feed through into the domestic economy."

"Production capacity utilization is only at its historical average, making a self-sustained pick-up of private investment less likely."

"At least for the ECB, today’s Ifo index is good news. It should hush German protests against the latest asset purchasing programme and even against future possible QE as there is one country in the Eurozone which will benefit significantly from a weaker euro exchange rate: Germany."

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