Financial markets always tend to closely monitor German’s economic data not only because the country acts as the driving force of the European economy but also because of the current political uncertainties occurring in Germany. Indeed, Merkel has been unable to build a coalition within the Bundestag and new elections may occur in January.
This morning the IFO business climate data was released, which provides details concerning indicators of economic development. The data is very strong despite markets expecting a slight deceleration. The data now stands at all-time high.
Other German data are improving. German GDP printed at 0.8% q/q for Q3. Germany will likely record its best economic year since 2011. We mentioned yesterday, inflation in the US is increasing - the same thing is happening in Europe.
Now that market expectations are far more significant concerning the Fed’s monetary policy, and we believe that there is room for disappointment, we believe the euro/dollar should continue climbing higher.