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Eurozone Investor Confidence Takes A Setback

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Eurozone Investor Confidence Takes A Setback

Investor sentiment within the Eurozone has fallen over the past month according to the Sentix Investor Confidence figure for May. The number came in at 12.8, down from the previous months reading of 14.1 and significantly missing consensus expectations of a 14.2 reading.

The Sentix is a comprehensive survey of over 1,600 financial analysts reporting their opinion on the likely trends in 36 different economic indicators, as such it has valid market power and is a key reading in the Eurozones monthly data calendar. The fall in this month’s number will contain an element of disappointment but the fact that the reading is in no immediate danger of returning back into the negative territory of the past few years will limit the downside market impact. On face value there is still market optimism, just not as much of it as previously.

The reduction in optimism is primarily being driven by the proliferation of sluggish economic indicators out of the various Eurozone member states over the past six months. The more likely reason for the fall in the Sentix indicator this month is the uncertainty that is present around the European Central Bank’s (ECB) intentions towards monetary policy action.

The ECB, which is due to meet this Thursday to discuss the Eurozone economy, is facing mounting pressure to provide monetary stimulus to the single currency bloc. Although an interest rate cut to the current refinance rate of up to 0.25% is a possibility it is not really being considered a likelihood on this occasion. The more probable outcome is that if the Bank takes action it will be along the lines of a quantitative easing program. The concern however is that the ECB will once again shy away from directly addressing the Zones impending deflationary problems, a stance that will not impress market investors.

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