THE TAKEWAY: Consumer Confidence Wanes > Weakens Outlook For Private Consumption > ECB To Maintain Current Policy
Consumer sentiment in the Euro-Zone weakened for the third month in July, with the index falling back to -11.4 from -10.3 in the previous month, and confidence may deteriorate further in the second-half of the year as the region faces a slowing recovery. As households turn increasingly pessimistic towards the economy, the recent development certainly dampens the outlook for private consumption, and the softer pace of growth may lead the European Central Bank to adopt a wait-and-see approach for the remainder of the year as the heightening risk for contagion weighs on the economy outlook.
Despite the dismal confidence reading, the initial reaction in the EUR/CHF was certainly short-lived, with the exchange rate paring the decline to 1.1606, and the rebound may gather pace throughout the North American trade as there appears to be a shift in market sentiment. Should the rebound in risk appetite gather pace, the EUR/CHF should continue to retrace the overnight decline from 1.1692, but the near-term advance in the exchange rate could give way over the next 24-hours of trading should the EU Summit fail to bring about a near-term resolution for the sovereign debt crisis.