ECB’s Policy Measures Kick In, Eurozone Outperforms Says Sentix

Talking Points:

- Sentix Investor Confidence Index rose to 15.7 from the prior 15.1, but below expectations

- Sentix indicator for the bond market slides to -16.5 indicating that stronger inflation is expected

- Sentix say ECB’s policy measures cause the Eurozone to outperform

Sentix Investor confidence Index gained +0.6 in December to reach +15.7, which marked a 4 month high. The index rose above the November +15.1 reading, but was below economists’ expectations for a rise to +17.0. The survey showed a decrease in the “Current Situation” result, down to +13.5 from the prior +16.0, but an uptick in “Expectations”; up to +18.0 from the prior +14.3, which led to the overall rise in the index. The Sentix Investor Confidence Index rates the six-month economic outlook for the Euro-Zone, surveyed from registered investors and analysts. A reading above zero indicates optimism, while a reading below zero indicates pessimism. 1052 investors took part in the survey which also included responses after the ECB meeting on Thursday.

Even though the index was below economists’ forecast, Sentix sounded upbeat about the Eurozone’s economy. Looking into the report, Sentix said that the Eurozone outperformed other world regions because of the positive impact of the ECB’s monetary policy, while the remaining world regions show signs of a slowdown. According to the report the Eurozone’s economy is in the “boom” faze (according to the principle of the “economy clock”). Sentix said that the explanation to the rise in the Eurozone, contrary to the global trend, should be found in Draghi’s “whatever it takes” rhetoric, which investors seemed to have embraced. Sentix further commented on the ECB’s monetary policy, saying that flooding the market with cheap cash gradually loses its appeal, but market participants expect inflation rates to go as the sentix indicator for the bond market dropped to -16.5.

DailyFX Currency Strategist Christopher Vecchio recently said that in the short-term, it’s likely that traders will reduce extreme positioning further in EUR and USD pairs, going into the Federal Reserve’s December 16 meeting.