EUR/USD Climbs Today on Positive German Business Confidence

The IFO Business Climate Index rose to 110.3 for the January period, from 109.8 the previous month, which puts this index at a record high.

Via AFP - German business confidence at record high

The German economy has started the year with great vigour, Ifo president Hans-Werner Sinn said in a statement. The figures backed up the ZEW index of German financial market confidence earlier this week, which jumped to its highest level since July 2010 at 15.4 points.

The institute polls 7,000 German manufacturing, construction, wholesale and retail companies each month to establish the barometer of business sentiment. The firms are just as satisfied with their current business as they were in December and they have given more favourable assessments of their business prospects for the coming half year, Sinn said.

This data shows that for all the Euro-zone's troubles, Germany's growth is not on the list. The economy has come out of the Great Recession as one of the strongest, and it has propped up the Euro-zone growth numbers to counter-act the smaller ailing periphery countries which are struggling. A steady fall in German unemployment plus higher wages have lead to forecasts of a long-awaited pick-up in consumption to support exports and investment as growth drivers.

French business confidence rose to a 3 year high. These 2 economies are the drivers for the Euro-zone and therefore today's data was a positive for the Euro. We may expect stronger growth figures from Germany in the first half of 2011.

The Euro-zone economies should continue to be helped by low interest rates, despite the ECB's recent shift and harder line on inflation in the just passed ECB interest rate meeting. We also have further movement on some kind of resolution on the sovereign debt problem.

Eurogroup's Juncker Says Response to Crisis To Be Complete in a Few Weeks

The timeline for European political leaders to come together on a more permanent comprehensive solution for the sovereign debt crisis may be upon us fairly soon. The Eurogroup's Jean-Claude Juncker made the statement today that a proposal could be ready in a few weeks, likely focusing on the monthly meeting of European ministers in early February.

Via Reuters - Eurogroup Juncker: response to crisis in a few weeks

The chairman of euro zone finance ministers Jean-Claude Juncker said the euro zone's comprehensive response to the crisis was likely to be ready in a few weeks, but would not comment on any specifics.

Asked if he could comment on how concrete were ideas of bond buy-backs by the European Financial Stability Facility (EFSF) or cheaper EFSF loans and what were their chances of realisation and likely timetable, Juncker said:

No I can't. We are supposed to formulate a comprehensive answer to the crisis in a few weeks from now and different issues are under examination and by no means a pre-decision would have been taken, he told reporters.

Asked if he could name three ideas with the biggest chance of support, he said: There are plenty of ideas.

The news around the expansion of the role or size of the EFSF has helped power the relief rally in the EUR/USD as it surged to an 8-week high. While the markets have usually seen politicians responding during the height of a crisis, it seems that there is newfound purpose to come to some kind of longer term solution that breaks the current precarious status-quo. Let's see what the final option will be. For now, the Euro gets a benefit here as well.