European Economy Booming According to Sentix Index
- European economic growth is booming, despite Catalan travails.
- Traders remain short EUR/USD indicating prices may edge higher.
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The European economy is booming, according to the latest Sentix Economic index, which hit its highest level since July 2007. The overall index rose to 34.0 in November, drubbing expectations of a rise to 31.0 and a prior month’s reading of 29.7. The results of the poll, taken November 2-4, are even more impressive in the light of Spain imposing direct rule on Catalonia and issuing an arrest warrant for former leader Carles Puigdemont.
According to Sentix, both situation and expectations contribute to this positive development.
“Things are even better in Germany, where we can report all-time highs. However, the upturn is not just focused on Europe. All world regions considered by Sentix show further improvements. The global economy is booming. This should make the question of overheating symptoms more acute.”
The latest ECB data show that growth in the Euroland is booming at a y/y rate of 2.5%, although a downtick in annual inflation to 1.6% from 1.8% means growth is not feeding through to higher prices as quickly as the ECB would like.
Chart: EURUSD Daily Timeframe (July – November 6, 2017)
The latest IG Client Sentiment data show traders are net-short EURUSD, a sign that the pair may push higher. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSDprices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.
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--- Written by Nick Cawley, Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.