ZEW Sentiment Indices Dent EUR Test On 1.1600

Published date: 16/10/2018

This morning's release of the ZEW economic sentiment indices for both the EU and Germany have both come in weaker than expected, and adding weight to the hit on the EUR is the lower than expected trade balance for Aug which has recorded a Eur11.7bln print vs the Eur15.1bln expected.  

For Oct though, sentiment in Germany has fallen from -10.6 to -24.7, which is pretty significant when you consider the median forecasts were for a -12.3 reading, though with the market widely acknowledging the fact that the trade wars have heightened fears in all exporting regions, the element of surprise is not as strong as it would be under more normal circumstances.  

For the EU as a whole, sentiment drops from -7.2 to -19.4, and naturally this encompasses the German figure.   

However, when looking at the reaction of EUR/USD, we also take note of the move in EUR/CHF, and the cross rate is still showing a small gain on the day, so the net effect is pretty marginal on this basis.  Indeed, EUR/USD is also only 20 ticks or so lower, so it can be said that the market is not overly concerned over these figures as yet, though we have to wait until the end of the day to gauge this.  

Markets still look relatively light in terms of volume as the USD index has again found support at circa 95.00.  We have a real stalemate in the spot markets at the moment, so it seems buyers and sellers are pretty evenly matched at these levels, resulting in the consolidation we are seeing at the moment. 


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