Upbeat Consumer Confidence Can’t Unclip Euro’s Wings
- Euro-Zone consumer confidence rose in December above expectations to a 20-month high.
- Upbeat data will boost hopes that growth has picked up in Euro region.
- But concerns about political turmoil next year are still putting pressure on the Euro.
Consumer confidence in the Euro-Zone rose in December by more than economists had expected, according to a flash estimate released by the European Commission Wednesday.
The indicator rose by 1.1 points to -5.1 points from a revised -6.0 in November to reach a 20-month high.
Economists had expected sentiment to be at -6.0 points.
The indicator showed sentiment rose for a fourth month in a row in December and at the best level since April, substantially above the long-term average of -12.7, as consumers enjoy higher employment and restricted inflation.
This encouraging data will boost hopes that Euro-Zone growth will have picked up in the fourth quarter of 2016 and is on course for a strong start to the New Year.
However, there are great concerns that the Euro-Zone’s growth prospects – and with it the Euro’s – will be held back in 2017 by a minefield of political uncertainty, beginning with elections in the Netherlands in March, that threaten the very existence of the currency.
General elections are also due in France (in April/May) and Germany (around September). There may also be one in Italy after the December referendum defeat on constitutional reform, which could bring about the first anti-Euro government within the bloc.
The European Central Bank is therefore still expected to pursue its current loose and unconventional monetary policy for the foreseeable future, which will undermine the Euro.
EURUSD failed to be significantly sparked into action by the positive data. It currently trades at 1.0431, a small rise of 0.42% in the session. It’s up a similar amount against the Pound, which is once again feeling the strain from Brexit concerns. EURGBP currently trades at around 0.8440.
EURUSD 15-minute chart
--- Written by Oliver Morrison, Analyst
To contact Oliver, email him at email@example.com
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