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“The German economy is not affected by coronavirus” – says the IFO, Germany’s leading think tank. His words – accompanied by a minor beat in the institution’s Business Climate figure for February – are helping EUR/USD recovery, FXStreet’s analyst Yohay Elam reports. 

Key quotes

“IFO’s optimism may be unwarranted – or perhaps already outdated. Since the survey was taken, the virus has already taken the lives of four people in northern Italy where authorities have put several towns under lockdown. The disease is taking an economic toll on Europe and Germany is unlikely to be immune.”

“German growth has been fueled by Chinese demand in recent years and if the world’s second-largest economy grinds to a halt – Europe’s biggest one would feel the pain.”

“For the dollar, coronavirus has been most beneficial. The greenback benefits from safe-haven flow into US bonds. On the other hand, lower bond yields make the world’s reserve currency less attractive.”

“While not all factors are EUR/USD bearish, the old continent is likely to struggle with the virus more than America.”