German GfK Consumer Climate Index Brings Hope of Better Days

It was a quiet start to the day for the EUR/USD on the economic calendar. The German economy was in the spotlight again, with consumer confidence figures for January in focus.

Economic data from Germany has suggested a possible change in direction. Business sentiment, private sector activity, and wholesale inflation numbers point to improving economic conditions.

Today’s consumer sentiment numbers gave the markets a sense of whether steady labor market conditions and hopes of softening inflationary pressures can support a pickup in consumption.

In January, the GfK Consumer Climate Indicator rose from -40.2 to -37.8. Economists forecast a more modest increase to -38.0.

According to the December survey,

• Income expectations rose for the third consecutive month in December, increasing by 10.9 points to -43.4. However, the Indicator remains 50 points lower than in December 2021.
• Labor agreements for 2023 have supported a more optimistic outlook on purchasing power.
• Economic expectations increase for a second consecutive month, rising by 7.6 points to -10.3. However, the Indicator was down 27.4 points from December 2021.
• Consumers expect the German economy to fall into a recession, though consumers anticipate a less severe downturn than previously thought.
• The propensity to buy Indicator steadied at the end of the year, rising by 2.3 points to -16.3. The Indicator declined by just under 17.1 points when compared with December 2021.
• However, uncertainty due to the pandemic, the war in Ukraine, and inflation have led to consumers tightening their purse strings.
• While concerns over higher heating bills have also contributed to a lackluster propensity to buy, stable employment conditions continue to support a more positive outlook.

Following the recent stats out of Germany, ECB member commentary will draw interest. However, no ECB members are speaking today, leaving the markets to monitor chatter with the media.

EUR/USD Price Action

Ahead of today’s consumer sentiment figures, the EUR/USD rose to a pre-stat high of $1.06290 before falling to a low of $1.06070.

In response to the consumer sentiment numbers, the EUR/USD fell to a post-stat low of $1.06111 before rising to a high of $1.06244.

At the time of writing, the EUR/USD was up 0.03% to $1.06240.

Up Next

House sector data for November and consumer confidence figures for December will be in focus in the US session.

While the consumer confidence figure will likely have the most influence, housing sector numbers will also garner interest.

Mortgage rates and recession fears have adversely affected the housing sector this year. Weak building permit and housing start numbers on Tuesday reflected market conditions. Existing home sales will likely provide further evidence of deteriorating housing sector conditions later today.

However, with the Fed a market focal point, investors will need to monitor FOMC member commentary.