German May IFO Reading Sees Light At The End Of The Tunnel

Fundamental analysis of Forex market


  • Quiet price action with UK closed for banking holiday, US closed for Memorial Day holiday
  • German May IFO Survey less pessimistic and sees light at the end of the tunnel as lockdown measures ease
  • German Q1 GDP reading confirmed a technical recession for the country
  • EU Commission expected to unveil its recovery plan on Wed, May 27th


  • Japan govt said to be considering second extra budget worth >¥100T ($929B); expected to include ¥60T to expand low-interest loan scheme for companies, ¥27T for other financial aid programs (Reminder: In April, Japan approved a total stimulus package of ¥117.1T, included the first extra budget of ¥25.6T)
  • China Foreign Min Wang Yi: ‘Political virus’ is spreading in US along with Covid-19; US and China should look for ways to avoid a new cold war. Urged the United States to understand the highly sensitive nature of the Taiwan issue, to abide by the one China policy. Stressed not to test China’s bottom line and not to underestimate the resolve of the 1.4 billion Chinese people in defending national unity


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  • Total global cases 5,407,701 (+6.0% vs. Friday); Total death 345.1K (+3.7% vs. Friday)


  • Austria, Denmark, the Netherlands and Sweden (aka frugal four) said to be working on EU Recovery Fund and pushing for a “loans for loans” approach. Proposal notes the recovery fund should be temporary and one-off, with a sunset clause after two years, and should not lead to debt mutualization (Insight: EU Commission is expected to unveil its proposal for a Recovery Instrument and revamped 2021-2027 EU budget on Wednesday, May 27th)
  • France Budget Min Darmanin: Not planning on raising taxes. Reiterated govt view that debt to GDP ratio could be over 115% by end of the year due to coronavirus spending
  • UK businesses said to have to pay at least a fifth of the wages of furloughed employees from August


  • US announced new travel restrictions with Brazil as the country reported ~360K cases of coronavirus (2nd highest in world)



  • Indices [Stoxx600 +0.84% at 343.08, FTSE -0.37% at 5,993.28, DAX +1.88% at 11,282.38, CAC-40 +1.19% at 4,497.48, IBEX-35 +1.65% at 6,808.00, FTSE MIB +1.04% at 17,496.50, SMI +0.68% at 9,754.50, S&P 500 Futures +0.99%]
  • Market Focal Points/Key Themes: European indices open modestly higher across the board; underperforming sectors include telecom; better performing sectors lead by consumer discretionary and healthcare; UK market closed for holiday; Abivax obtains regulatory approval for Phase IIb/III trial of anti-covid-19 candidate; reportedly Bayer enters deal to conclude significant number of Roundup suits; US market closed for holiday


  • Healthcare: Bayer [BAYN.DE] +5% (press reports on lawsuits deal), Abivax [ABVX.FR] +7% (approval), Poxel [POXEL.FR] -10% (placement; trial results)


  • France Fin Min Le Maire: Car makers must commit to production within France. Stimulus plan to encourage electric car demand. Still had not signed the State guarantee for Renault loans
  • German IFO Economists stated that the domestic economy saw light at the end of the tunnel as gradual easing of lockdown measures offer a glimmer of hope
  • Germany Economy Ministry said to seek supporting medium-sized companies with up to 249 employees with €50K/month between Jun-Dec period. For eligibility a company should have recorded at least a 60% y/y drop in April and May sales
  • Japan PM Abe formally lifted the National State of Emergency for remaining prefectures on Monday, May 25th (as expected). He confirmed that the combined economic stimulus from 1st and 2nd packages to exceed ¥200B and would decide on 2nd supplemental budget on Wed, May 27th. Reiterated stance that both govt and BOJ to deploy all necessary steps to overcome the effects from the coronavirus outbreak
  • China Foreign Affairs Commissioner Xie Feng: Hong Kong’s autonomy, judicial power to remains the same after National Security Bill was implemented. Reiterates stance that law was a basis for restoring security and peace in Hong Kong. Protests were the gravest situation in HK since 1997
  • Iran Oil Min Zanganeh: oil prices were subject to supply and demand and hard to predict

Currencies/ Fixed Income

  • USD maintained a slightly firmer tone in quiet holiday trading in Europe.
  • EUR/USD holding below the 1.09 level due to safe-haven flows. Markets ignored German May IFO reading which improve from month ago level and prompted some light at the end of the tunnel. Focus turns to EU Commission recovery plan which is expected to be formally unveiled mid-week (Wed)
  • China’s CNY fixing at a 12-year low against USD. Dealers cited China’s failure to deliver upside surprises in its stimulus plan unveiled at the NPC and Beijing’s proposal for a national security law for Hong Kong. PBoC set the reference rate at 7.1209 v 7.0939 prior for its weakest fix since Feb 2008

Economic Data

  • (FI) Finland Apr PPI M/M: -1.4% v -3.0% prior; Y/Y: -7.0% v -5.6% prior
  • (DE) Germany Q1 Final GDP Q/Q: -2.2% v -2.2%e; Y/Y: -2.3% v -2.3%e; GDP NSA Y/Y: -1.9% v -1.9%e
  • (DE) Germany Q1 Private Consumption Q/Q: -3.2% v -2.0%e; Government Spending Q/Q: 0.2% v 0.6%e; Capital Investment Q/Q: -0.2% v 0.0%e
  • (CH) Swiss Q1 Industrial Output Y/Y: 0.8% v 1.4% prior; Industry & Construction Output Y/Y: 0.8% v 1.2% prior
  • (CZ) Czech May Consumer Confidence Index: -14.3 v -25.3 prior; Business Confidence: -18.6 v -16.2 prior; Consumer & Business Confidence (Composite): -17.8 v -18.0 prior
  • (ES) Spain Apr PPI M/M: -3.0% v -3.0% prior; Y/Y: -8.4% v -4.9% prior
  • (AT) Austria Mar Industrial Production M/M: -9.5% v -2.7% prior; Y/Y: -12.1% v -2.8% prior
  • (SE) Sweden Apr Unemployment Rate: 8.2% v 7.1% prior; Unemployment Rate (Seasonally Adjusted): 7.9% v 7.8%e; Trend Unemployment Rate: 7.9% v 7.2% prior
  • (DE) Germany May IFO Business Climate Survey: 79.5 v 78.5e; Current Assessment Survey: 78.9 v 80.0e; Expectations Survey: 80.1 v 75.0e
  • (CH) Swiss weekly Total Sight Deposits (CHF): 679.9B v 673.5B prior; Domestic Sight Deposits: 596.6B v 591B prior
  • (NG) Nigeria Q1 GDP Y/Y: 1.9% v 0.8%e
  • (TW) Taiwan Apr Industrial Production Y/Y: 3.5% v 1.1%e
  • (TW) Taiwan Apr M2 Money Supply Y/Y: 4.2% v 4.4% prior; M1 Money Supply Y/Y: 7.5% v 7.0% prior
  • (HK) Hong Kong Apr Trade Balance (HKD): -23.3B v -31.0Be; Exports Y/Y: -3.7% v -4.5%e; Imports Y/Y: -6.7% v -8.4%e

Fixed Income Issuance

  • (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month Bills; Avg Yield: 0.05% v 0.04% prior; Bid-to-cover: 2.69x v 2.54x prior

Looking Ahead

  • (IL) Israel Apr Leading “S” Indicator: No est v -0.1% prior
  • 05:30 (DE) Germany to sell €8.0B in 6-month and 12-month Bubills
  • 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €3.5-6.5B in 3-month, 9-month and 12-month Bills
  • 06:00 (IL) Israel Q1 Advance GDP Y/Y: -13.0%e v +4.6% prior
  • 06:00 (IL) Israel Apr Unemployment Rate: No est v 3.4% prior
  • 06:00 (RO) Romania to sell RON500M in 3.25% 2024 Bonds
  • 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
  • 06:00 (IL) Israel to sell Bonds
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (MX) Mexico Apr Trade Balance: $1.8Be v $3.4B prior
  • 07:00 (BR) Brazil May FGV Consumer Confidence: No est v 58.2 prior
  • 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 08:00 (PL) Poland Apr M3 Money Supply M/M: 1.9%e v 3.1% prior; Y/Y: 12.7%e v 11.8% prior
  • 08:00 (UK) No Daily Baltic Dry Bulk Index (UK holiday)
  • 08:50 (FR) France Debt Agency (AFT) to sell €8.9-10.0B in 3-month, 6-month and 12-month bills (4 tranches)
  • 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base rate unchanged at 0.10%
  • 09:00 (BE) Belgium May Business Confidence: -29.3e v -36.1 prior
  • 09:45 (EU) ECB weekly QE bond buying update
  • 10:00 (MX) Mexico Q1 Current Account Balance: -$0.2Be v $2.5B prior
  • 16:00 (US) Weekly Crop Progress Report
  • 18:45 (NZ) New Zealand Apr Trade Balance (NZD): 1.3Be v 0.7B prior; Exports: No est v 5.8B prior; Imports: No est v 5.1B prior
  • 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 92.3 prior
  • 19:50 (JP) Japan Apr PPI Services Y/Y: No est v 1.6% prior
  • 23:00 (TH) Thailand Central Bank to sell 3-month and 6-month bills
  • 23:30 (HK) Hong Kong to sell 3-month and 6-month bills
  • 23:35 (JP) Japan to sell 40-year JGB bonds