Brexit is not a catastrophe. That is the notion that the surprises in IFO’s numbers provide. The Business Climate number is 108.3, a small slide but better than expected. Business expectations are down to 102.2, but also better than predcited. And the Current Assessment number is even showing an advance: 114.7 from an upwards revised 114.6 in June. All in all, this looks positive and contrasts the ZEW number.
EUR/USD ticks up but does not go anywhere fast. It is a reaction worth 5-10 pips so far. It seems that the atmosphere is still negative, and this does little to alleviate various concerns.
The German IFO Business Climate was expected to slide in July to 107.5 from 108.7 points in June. The Expectations figure was predicted to slide from 103.1 to 101.2 and the Current Assessment from 114.5 to 114 points.
EUR/USD traded at around 1.0965 before the announcement.
The indicator comes from Germany’s No.1 Think-tank and this time it is eyed way beyond the borders of Europe’s No. 1 economy. This the first post-Brexit release from IFO. According to the ZEW indicator, business confidence plunged. Last week’s release showed a dive from a positive figure around 20 points to a negative -6.8 score. The negative number reflects outright pessimism.
However, ZEW tends to be more volatile and IFO is has more influence, despite the late release.
In the UK, we have already learnt that the country’s vote to leave the EU has already hit confidence quite a bit. Services and manufacturing PMIs plunged into contraction territory and the pound certainly suffered.
The generally gloomy atmosphere that gripped the markets sent EUR/USD to support on Friday.
But not everybody is pessimistic about the euro. Here is a recent opinion: The Case For A Higher EUR: Outlook & Targets – Morgan Stanley
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