- German economic sentiment improves after a decline seen last month
- Concerns over the stronger euro fade
- EURUSD still hovers below a critical resistance zone
The German ZEW index marked a substantial improvement in September when it comes to economic expectations which saw an increase from 10 to 17. In addition, the assessment of current conditions moved up from 86.7 to 87.9 – both readings quite easily beat forecasts.
The German ZEW showed a broad-based improvement in September. Source: Bloomberg, XTB Research
On the surface, a decline registered a month ago could have been a bit worrisome but it wasn’t confirmed in September. Consequently, the backdrop (6 months ahead) for the German economy is still forecast to be buoyant despite a surge seen on the single currency. On top of that, the ZEW institute added that worries about effects of the stronger euro have, for now, faded into the background. Furthermore, bank lending and increasing investment activities by both the government and private firms are likely reasons for the improvement, the institute said in a statement.
Even as the ZEW gauges are not among the most important as far as soft indicators are concerned, it underlined that the impact stemming from the stronger euro had been no so adverse thus far. It could also suggest that the European Central Bank might adopt a softer stance with regard to the ex-change rate. Keep in mind that the higher value of the currency not necessarily means a straightforward negative effect on inflation if appreciation is a result of higher domestic demand which for sure takes place in the euro area.
The EURUSD remains little changed following the ZEW index and hovers just under a crucial resistance zone. It’s worth noticing that a bearish candlestick has been drawn on an hourly time frame which indicates some hurdles for buyers. Source: xStation5