Survey data released by think tank Ifo has shown that German business sentiment defied forecasts by improving in March.
President of the Ifo Institute Clemens Fuest said; “The Ifo Business Climate Index rose to 112.3 points in March from 111.1 1 points last month, reaching its highest level since July 2011.”
Unexpected increases in the Expectations and Current Conditions sub-indices, to 105.7 and 119.3 respectively, pushed the overall score higher.
Each month, Ifo interviews around 7,000 businesses operating in Germany, including construction firms, manufacturers, wholesalers, retailers.
Manufacturing confidence mirrored the headline index with a six-year high, retailers were significantly more upbeat about their situation and positive assessment of the current situation amongst contractors was at its highest since 1991.
Fuest said; “The upwards trend in assessments of the current business situation continues unabated. The business outlook for companies also improved again this month. The upswing in the German economy is gaining impetus.”
Coupled with last week’s above-forecast purchasing managers’ indices (PMIs) from IHS Markit, today’s sentiment data paints a picture of improving conditions in the eurozone economy.
This has increased the pressure on the European Central Bank (ECB) to begin normalising monetary policy.
But higher odds of monetary tightening from the ECB has not succeeded in sending the GBP/EUR exchange rate lower.
Despite the strong German figures, the eurozone recovery remains unsteady and there are still threats to the currency bloc from the weak economy in Greece and the teetering Italian banking sector.
This is keeping the pound marginally more appealing than the euro today.
Sterling is on the rise as investors look for safe-havens on the fear markets may have been too confident in US President Donald Trump’s abilities to unleash new stimulus measures in the US.
Traders had piled into the US dollar on the expectation of new tax cuts and…