Mixed German, UK Data Today as ZEW Survey Dissapoints
THE TAKEAWAY: German ZEW survey mixed, UK inflation as expected -> Economic growth remains primary concern -> Currencies consolidate today after sharp drops yesterday
Bolstered by better-than-expected industrial production and manufacturing orders in October, Europe’s largest economy appears to be weathering the current storm better than any other EMU nation, although that may not be saying much.
The influential German ZEW December survey today showed investor confidence rising for the first time in many months. The confidence gauge showed an increase to -53.8 from a 3-year low of -55.2 in November. Economists had predicted a drop to -55.8.
Even so, a particularly weak reading in the current situation category showed that many German’s don’t expect the newfound confidence to last. Current situation came in today at 26.8, versus the 31.0 predicted by economists. ZEW center officials cited disappointment in last week’s EU summit’s inability to work toward a comprehensive solution to the European debt crisis as the catalyst behind the low reading.
Moreover, it should be noted that the manufacturing and production figures which contributed to December’s heightened investor confidence are not expected to continue into the next few months. Prominent figures including ECB President Mario Draghi have warned of increased recession risk in Europe going in the 2012.
Meanwhile, UK inflation data for November released half an hour before the ZEW survey showed as-expected CPI, at 0.2% monthly and 4.8% yearly. The Bank of England’s main talking point on the issue focused on yearly inflation dropping from 5.0% last year, which some BoE officials view as vindication for their quantitative easing measures. Under pressure to act against the fallout from the European credit crisis, the BoE recently held its asset purchase target at 275 billion Pounds, after increasing the measure by 75 billion Pounds in October.
Currencies consolidated slightly today after coming under pressure versus the Dollar yesterday on a large bout of risk liquidation. The Euro is poised to break below October lows at 1.3145, which could accelerate declines into the 1.20s.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.