Corporate morale in Germany unexpectedly rose in March to its highest level in seven months, defying the strong euro and suggesting Europe's largest economy is increasingly resistant to problems in the United States.
The Ifo research institute said today its business climate index, based on a monthly poll of around 7,000 firms, rose to 104.8 from 104.1 in February. It was the third rise in a row and took the index to its highest level since August.
Following the data - which beat the Reuters consensus forecast for a drop to 103.4 - the euro erased losses against the dollar and Bund futures turned negative.
"These results indicate that with the beginning of the year the German economy has gained strength," Ifo said, adding the outlook for the next six months had also brightened.
The rise in sentiment dampened any expectations the European Central Bank could follow its US and British counterparts by cutting interest rates in the near future.
Hans Guenter Russ, an economist at the Munich-based think tank, told Reuters recent data showed German economic activity was becoming less dependent on the US economy, which a number of leading analysts have said may already be in a recession.
"Although the US economy is still the main locomotive, the German economy has decoupled itself," he said in an interview.
The United States has been stung by a marked downturn in its housing market which has hit banks and rattled consumers.
Firms regard oil prices, which soared above $110 per barrel earlier in March, as their "number one" risk, he added.