What the Market is Expecting
With the Greek debt crisis temporarily resolved and a re-commitment to stimulus by the European Central Bank, confidence by business leaders may have gained again in the month of December. Current expectations are for a mark of 101.9 in the monthly comparison, rising above the 101.4 witnessed in November.
The higher figure would be the second straight increase in the report and indicative of a turnaround in the otherwise downward trend of the last 11 months.
A positive figure for the IFO survey would also match positive readings set forth by the ZEW earlier last week – which turned positive for the first time in seven months.
At or Above 101.9. EURUSD bullish, an above 101.9 figure would bolster notions of an end the worst of Europe’s troubles and would likely dampen European Central Bank rate cut speculation – which have risen on lackluster EU data. Policymakers are expected to cut rates by 25 basis points early in 2013. However, higher business confidence could be reflective of growth potential in the region for next year, making rate cuts unnecessary.
Look out for a breakout of major resistance at 1.3250 if business confidence rises, en route to a test of 1.3310.
Below 101.9. However, a conversely lower mark on business confidence would be negative for the single currency as it would reverse currently supported bullishness brought on by the turn in the previous investor’s sentiment.
Expect the report to compound a failure to extend towards 1.3250 resistance. Ultimately, this would place focus on initial support at 1.3073.