German Business Sentiment Unexpectedly Improves in March

It is a relatively quiet start to the week on the European economic calendar. German business sentiment was in the spotlight this morning.

Following a series of ECB interest rate hikes, today’s numbers drew plenty of interest.

The German Ifo Business Climate Index unexpectedly increased from 91.1 to 93.3 in March. Economists forecast a modest decline to 91.0. The Business Expectations and Current Assessment sub-Indexes contributed to the increase in the headline number.

In March, the German Business Expectations Index rose from 88.4 to 91.2, with the Current Assessment Index up from 93.9 to 95.4. Economists forecast the Current Assessment Sub-Index to rise from 93.9 to 94.1 while expecting the Business Expectations Sub-Index to fall from 88.5 to 88.3.

According to the March survey,

• Manufacturing companies were more satisfied with their current business situation, with sentiment seeing a marked improvement in the key industries, including automotive, chemical, electrical & electronics, and machinery & equipment.
• Manufacturers also reported little pessimism, supporting a pickup in the expectations component.
• Service sector companies were more satisfied with their current conditions, with the expectations component hitting its highest value since February 2022.

The latest figures will deliver the ECB relief. Businesses are seemingly more satisfied with the more optimistic economic outlook than rising borrowing costs.

EUR/USD Reaction to the German Ifo Business Climate Index

Ahead of the Ifo numbers, the EUR/USD rose to a pre-stat high of $1.07822 before falling to a low of $1.07450.

However, in response to the Ifo survey, the EUR/USD slipped to a post-stat low of $1.07505 before rising to a high of $1.07726.

This morning, the EUR/USD was up 0.08% to $1.07681.

Next Up

With business sentiment in focus, investors should also monitor ECB member speeches. ECB Executive Board members Frank Elderson and Isabel Schnabel will speak today. Comments relating to the banking sector and influence on monetary policy are likely focal points.

Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider.

Banking sector-related news and FOMC member commentary will guide the markets through the afternoon session.