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Foreign Exchange

German companies turn bearish on euro; corporates have strong track record in EURUSD

German companies have returned to their bearish view on the euro, as the euphoria over the easing of eurozone debt problems has subsided, according to a survey from Commerzbank.

Commerzbank’s FX Compass Index, which canvasses the opinion of more than 1,000 German importers and exporters every month, showed that sentiment during the three-month horizon turned unambiguously negative towards EURUSD in March. That followed a brief move into positive territory in February, after the second bail-out deal for Athens eased worries over eurozone sovereign debt and the European Central Bank’s long-term financing operation helped lower concerns over the health of eurozone banks.

The proportion of euro bears rose by 10% to 36% in March for the three-month horizon, while the proportion of euro bulls fell by 5%. That took the FX Compass Index to -13, down from two in February and back to the euro bearish view that has dominated since September.

 German companies' assessmet of EURUSD over 3,6,12 months

 Source: Commerzbank FX Research

Alexandra Bechtel, strategist at Commerzbank, says that German companies have proved they have a good instinct for the short-term direction of EURUSD.

“With the exception of August 2011, they were always correct with their euro-sceptical three-month outlook,” she says.

There was also a notable fall in the number of euro bulls over the medium to long term.

During the 12-month horizon, the proportion of EURUSD bulls fell by 12% to 34%, the lowest since September, while the proportion of bears held steady at 29%.

The proportion of EURUSD bulls also fell 5% to 34% over six months, while the percentage of bears rose 5% to 35%, taking the six-month FX Compass Index to -1.

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