The Euro is foreseen to advance further today on encouraging signs that Germany will power the Euro Zone economy in its recovery path this year. After reports showed that business activity in the European powerhouse posted a positive start to 2013, the German Ifo Business Climate is deemed to reveal that business confidence in the nation improved further. Meanwhile, talks of additional stimulus from the Bank of Japan are seen to weigh on the Yen today after consumer prices fell once again in the country.
The Euro Zone economy took a step closer to recovery this month as the rate of slump in the region’s private sector eased more than expected, business surveys showed yesterday. Markit’s Flash Composite Euro Zone Purchasing Managers’ Index rose from 47.2 points to 48.2 points in January, exceeding expectations of an increase to a grade of 47.5. Although the index has now come in below the 50-mark indicating contraction in 16 out of the past 17 months, the data suggested conditions in the bloc were improving. Markit even estimates that the current downturn is looking poised to end in the first half of the year. The overall Euro Zone economy contracted in Q2 and Q3 of 2012, meeting the technical definition of recession, and the slump is expected to have deepened in the fourth quarter.
Despite data showing a deeper downturn in France, Germany, the bloc’s largest economy, looks to be recovering quickly. The country’s private sector saw its strongest growth in a year as service firms roared ahead and manufacturers’ contraction slowing. In fact, a report today is forecast to show that business sentiment in Germany rose to its highest level in six months in January. The German Ifo Business Climate is estimated to incline from 102.4 points to 103.1 this month, potentially its best reading since July 2012. Recent developments in the debt crisis fight and the stabilization in the financial markets likely contributed to the improvement in confidence. The Federal Statistics Office said last week that German growth slowed to 0.7 percent in 2012 and estimates GDP to have dipped by as much as 0.5 percent in Q4 of 2012. Nonetheless, such economic reports suggest that the economy is quickly recovering.
Meanwhile, continued falling consumer prices in Japan are deemed to highlight the challenge being faced by the Bank of Japan to achieve its inflation target. Japanese consumer prices excluding fresh food dipped 0.2 percent in December from a year earlier to record its second consecutive decline. Analysts say that the report only piles the pressure on the BOJ to unveil further easing to achieve its target. Considering these, a long position is advised for the EUR/JPY trades today.
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