Euro-zone Sentiment Indicators Reveal Murky Outlook for EMU
Euro-area sentiment indices for March on balance came in as a mixed bad of outcomes. Economic confidence declined more than forecasts of 107.5 (vs. 107.9 previously) to 107.3 despite official comments in recent days and weeks suggesting the sentiment would not be effected by Japan’s earthquake & tsunami or ongoing turmoil in the Middle East and North Africa. Meanwhile, consumer confidence met expectations and remained unchanged from February’s reading, industrial confidence was firmer than forecast but unchanged from February’s showing and services confidence came in softer than forecast. The business climate indicator was a tad softer than expected and slipped back from February’s upwardly revised numbers.
While sentiment indices are not headline-grabbers, like IFOs or PMIs, the implications are worth taking note of ahead of more pivotal readings to come. Especially as global uncertainties mount the toll they may eventually take on EMU growth could have serious implications. If economic sentiment falls further and growth expectations are lowered the effect on periphery nations who are still desperately trying to get the economic recovery to stick could be severe.
The euro lost ground against the buck after the release of the weaker than expected headline data. The pair had been paring its early declines back above 1.4100 and into higher ground on the day before the downside trend resumed on the back of the release. The pair continues to pivot around the 1.4100 as investors mull their next move with speculation suggesting the ECB will raise rates in coming months and fresh hawkish rhetoric from Fed officials to contend with the market is looking a little unsure of itself at present and which direction it is going to eventually take.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.