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 businesses across Germany that 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's release are projecting the slight increase to 108.5, as compared to the previous number of 108.7.
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 that 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.
The recent ECB statement to the world's gathered financial press was seen as very accommodating and dovish. The ECB President, Mr Mario Draghi, said that he and his colleagues were in agreement and would do what it takes to ensure that eurozone inflation meets the 2% target and that the employment outlook improves significantly. Mr Draghi used the phrase “No Limits” to reiterate how seriously the ECB is committed to these twin goals. If necessary, the European Central Bank is expected to announce additional measures as early as March. As the German Ifo survey contributes to the data that the ECB samples, today’s release will have added significance.