Disappointing ZEW Figures Drag Euro Lower
The Zentrum Für Europäisch Wirtschaftsforschung (ZEW) Center for European Economic Research, has just published the key Sentiment Survey figure for February. Printing 55.7 against an expectation of 61.7 and a previous of also 61.7, this ZEW is significantly disappointing for the German economy. Additionally, the ZEW figure for the Eurozone as a whole has also disappointed, printing 68.5 against an expectation of 73.9 and a previous month number of 73.3.
The ZEW is one of the primary monthly figures that drives the Euro, measuring sentiment in both the German and the Eurozone economies. Up to 350 economists are surveyed for their opinions on the strength and prospects for the underlying economy, deviations from expectations can have a strong and immediate impact on the single currency.
Going into these figures the Euro had been aggressively challenging the medium term resistance level of 1.3725, no momentum has been available for a breakthrough and the market had been pinning hopes on today’s ZEW data to offer the needed impetus to make the topside breakout and push on towards the long term high of 1.3803.
Following this data release it looks like this breakout will have to wait for another day, the Euro is currently undergoing a strong selloff and seeking support at the 1.37 level. This currently looks likely to hold and is being seen by some in the market as a buying opportunity for the single currency.
Long term bullishness remains in the Eurozone economy, today’s ZEW report is undoubtedly a setback but it has to be remembered that although it contains some valid fundamental economic information, it is at its core a ‘traders’ figure. The ECB does respect this figure in its deliberations but is unlikely to base any monetary policy decisions on this number. Arguably the EU economic growth forecasts due this Friday should give a better picture of the overall health of the Eurozone economy.
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