- The IFO index of the German business climate rose unexpectedly in April.
- The EUR/USD extends its recovery towards 1,1400 in the European session.
Business feeling in Germany improved slightly in April, with the IFO index of the business climate rising to 86.9 in April from 86.7 in March. This reading exceeded the expectation of the market of 85.2.
Other details of the report showed that the IFO current evaluation index rose to 86.4 from 85.7 in the same period, while the expectations index fell to 87.4 from 87.7.
Market reaction
The EUR/USD maintains its position after this data. At the time of the publication, the EUR/USD rose 0.6% in the day to 1,1382.
German economy FAQS
The German economy has a significant impact on the euro due to its condition of greater economy within the Eurozone. The economic results of Germany, its GDP, employment and inflation, can greatly influence general stability and confidence in the euro. If the German economy is strengthened, it can reinforce the value of the euro, while the opposite occurs. In general, the German economy plays a crucial role in the strength of the euro and its perception in world markets.
Germany is the largest economy in the eurozone and, therefore, an influential actor in the region. During the sovereign debt crisis in the Eurozone in 2009-12, Germany was fundamental in the creation of several stability funds to rescue debtor countries. After the crisis, he assumed a leadership role in the application of the “fiscal pact”, a set of stricter norms to manage the finances of the Member States and punish the “debt sinners.” Germany headed a culture of “financial stability” and its economic model has been widely used as an economic growth model by other eurozone members.
The bunds are bonds issued by the German government. Like all bonds, they pay their holders a periodic payment of interest, or coupon, followed by the total value of the loan, or capital, at the expiration. Since Germany has the largest eurozone economy, BUNS are used as a reference for other European state bonds. Long -term bunds are considered a solid and without risk investment, since they are backed by the full faith and credit of the German nation. For this reason, investors consider them a refuge value, which are revalued in times of crisis and fall into periods of prosperity.
The yields of the German bond measure the annual profitability that an investor can expect from the possession of bonds of the German state, or bunds. Like other bonds, the BUNS pay their owners interest at regular intervals, called “coupon”, followed by the total value of the bond at the expiration. While the coupon is fixed, the performance varies, since it takes into account the changes in the price of the bonus, so it is considered a more exact reflection of profitability. A decrease in the price of the BUND increases the coupon as a percentage of the loan, which translates into a higher yield and vice versa for an increase. This explains why BUND’s performance moves reverse prices.
Bundesbank is the central bank of Germany. It plays a key role in the application of monetary policy in Germany and, in general, in the central banks of the region. Its objective is price stability, that is, maintaining low and predictable inflation. He is responsible for guaranteeing the proper functioning of payment systems in Germany and participates in the supervision of financial institutions. Bundesbank has a reputation as a conservative and gives priority to the fight against inflation over economic growth. It has influenced the creation and policy of the European Central Bank (ECB).
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
