[B]MARKET BRIEFING – LONDON OPEN 24.09.2015
This morning at 9:00 London time Ifo Institute for Economic Research will release the German Ifo Business Climate numbers.
This report is released on a monthly basis and some three weeks into the current month.
The Ifo is a survey of current and future business sentiment with respondents also requested to rate their expectation six months forward from the survey date.
Due to the size and breadth of this report the result of this survey is highly respected. This is because some 7000 business across Germany which are active in diverse sectors from manufacturing, construction, wholesale and retail are requested to respond.
The German Ifo Business Climate Survey is a leading indicator of the economic health of the country. As businesses can quickly recognize and adapt to the constantly changing market environment, this survey has proven to be a timely leading indicator to possible future economic activity.
Germany is the 4th largest economy in the world and by far the biggest and the most dominant within the European Union. This makes what happens in Germany very important. The release of the German Ifo can affect economic expectations and values of financial instruments not only in Germany but throughout the European Union.
The Ifo furthermore can have a dramatic effect on the Euro and the Euro crosses. Market volatility around the time of the Ifo release can potentially increase.
The forecasts for this month release are projecting the slight decrease to 107.8, as compared to the previous number of 108.3.
A result that is higher than expected could potentially have a positive effect on the Euro currency whereas an actual release that is lower than expected could see the single currency come under pressure.
The reason for this is an optimistic business outlook can precede an increase in business activity and economic growth whereas a pessimistic business outlook could indicate a future contraction in business activity and possible stagnation or drop off of economic growth.
As economic expansion is seen as being inflationary and economic contraction being deflationary the European Central Bank, (ECB) may step in an increase or decrease interest rates so as to ensure that the influential and dominant German economy does not grow or contract too quickly.
Today’s Ifo release is even more relevant due to the recent news that broke, that the German global automotive giant, Volkswagen had manipulated data on US diesel car emissions.
That a well-respected and much-loved brand such as Volkswagen had allowed its standards to slip has sent shock waves through the global automobile industry and dented consumer confidence and trust.
Although the feedback thus far, is that this case of data manipulation is not an industry wide transgression, the fallout could have a detrimental effect on Brand Germany. We have already seen equity values in automakers tumbled across world stock markets. The timing of this news could not have been more inappropriate with global indices breaking down from technical bearish long term patterns.
The Volkswagen Company, since its rebirth from the ruins of ashes of the Second World War, has been a champion of innovation and efforts to produce automobiles that are efficient and as non-polluting as possible to the environment. The very idea one of Europe’s industrial champions had misled its clients for sure is going to depress consumer confidence at the very time when the global economy is flat-lining.
It is expected that the fines that will be imposed on the Volkswagen group will be large. The company has already set aside EUR 6.5 billion, but many expect that potential financial penalties could top USD 18 billion. However, what could be more costly is the reputational cost of this scandal. The Volkswagen Company now needs to work in overdrive to reassure the public that this will not happen again.
Most of all, what is needed is an independent, consumer sponsored body that can independently test and verify vehicle emissions.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.1290
Target 2: 1.1085
Projected range in ATR’s: 0.0103
Daily control level: 1.1210
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5365
Target 2: 1.5130
Projected range in ATR’s: 0.0119
Daily control level: 1.5525
USDJPY
The intraday technical outlook
Trend 1 hour: Up
Target 1: 121.25
Target 2: 119.25
Projected range in ATR’s: 1.02
Daily control level: 119.70
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.9890
Target 2: 0.9710
Projected range in ATR’s: 0.0091
Daily control level: 0.9735
USDCAD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.3415
Target 2: 1.3225
Projected range in ATR’s: 0.0098
Daily control level: 1.3230
AUDUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 0.7090
Target 2: 0.6910
Projected range in ATR’s: 0.0089
Daily control level: 0.7160
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1143.00
Target 2: 1117.00
Projected range in ATR’s: 12.76
Daily control level: 1137.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 46.50
Target 2: 43.00
Projected range in ATR’s: 1.86
Daily control level: 47.25
MORE ON ACFXblog.com