Eurozone IFO – German business confidence surges but euro’s strength can be short lived
Peter Oberois
Dec. 19, 2006

The German business confidence is now highest since reunification in 1990 as Europe's largest economy looked set to weather a tax increase next year. The European bonds fell, euro surged on the hope that European Central Bank will increase rates twice more.

But all that euphoria can be short lived as Eurozone completes the cyclical boom with a secular long term recession. The European economies are dollar dependent. When dollar gets weak, the economies surge somewhat only to again dip down as dollar falls. This is going on for several years.

Export to the United States is a major component for the Euro Zone. While ECB can raise rates for a few times, they are concerned about the overall strength of the Euro Zone economies. A growth in Euro Zone is actually bullish for dollar because that will increase exports from US and decrease exports to US. As a result dollar can rise because of improving American trade deficit.

Eurozone IFO – German business confidence surges but euro’s strength can be short lived
Peter Oberois
A growth in Euro Zone is actually bullish for dollar because that will increase exports from US and decrease exports to US. As a result dollar can rise because of improving American trade deficit.
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The Sensex, which had gained over 490 points in the last two trading sessions, rose by 127.36 points to 13,614.52
Media Release
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