Risk Events: German Ifo Business Climate Index and US New Home Sales

German Ifo Business Climate Index and US New Home Sales figures will be released on Monday, August 25, 2014.  Main points:

  • Consecutive declining figures on the Ifo Business Climate Index
  • US housing market is picking up
AnnouncementTime (GMT)ForecastPrevious
German Ifo Business Climate Index8:00 AM107.0108.0
US New Home Sales2:00 PM430K406K

German Ifo BCI

US New Home Sales

The German Ifo Business Climate Index measures current economic conditions of the German economy and forecasts its environment for the next 6 months. It is based on surveys of manufacturers, builders, wholesalers, and retailers.

The index recently peaked in February 2014 at 111.3 and has been declining since April 2014. The previous figure above the recent peak was observed back in July 2011. If Monday’s forecast is realized, this will be the fourth consecutive decline. The indicator has a long term average of 106.9, with recent trends, if this level is broken it will have a negative outlook on the German economy.

US New Home Sales are steadily picking up since the housing crash though the figure is having some trouble breaking the 450K – 460K range. If Monday’s announcement is realized it should set the next announcements up do just this.

Conclusions…

The German economy looks to be faltering with recent announcements and the US housing market is picking up. Specifically to the announcements, if the Ifo Business Climate Index is over forecasted and the actual figure falls below its long term average then look to sell German denominated financial securities. For New Home Sales, look to see where the figure appears with respect to its forecast of 430K. The best case scenario would have a figure above 440K and a worst case is a number around or below its previous of 406K. Be warned though the UK market is on a Bank Holiday so the UK session may have light volume resulting in flat or low volume volatile conditions.