German Business Confidence Plunges, ECB to Come in For the Rescue?

In some negative news for the German economy, a closely watched survey shows German executives were slightly more pessimistic than expected in December. According to a report released by the Ifo institute, it was stated that its business climate index for December fell to 108.7. Economists on the street had expected the reading to remain unchanged at 109. It is important to point towards the fact that the German government had trimmed its growth expectations and cut its growth forecast for this year to 1.7 percent as compared to an earlier expectation for 1.8 during the month of October. The German government left its 2016 forecast unchanged at 1.8 percent.

It is imperative to state that the German government had cited the weakness in emerging markets like China to be one of the key reasons for the cut in growth expectations for the year. The sharp slowdown in the world’s second largest economy which continues to remain one of the biggest trading partner for the German economy . Analysts believe the sharp slowdown poses huge downside risks to the German economy going forward. It is important to state that the German economy is the largest economy in the Eurozone is considered to be the growth driver for Europe at the moment.

Traders believe the European Central Bank would be forced to increase the size of its easing program in order to provide the much needed impetus to the Eurozone economies which continues to remain fragile at the current moment. The euro was mostly lower during the trading session giving up most of its gains from the overnight trading session which is seen as a huge negative. It is imperative to state that the euro has been in a strong uptrend ever since the European Central Bank introduced easing measures which were below most street expectations.