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EUR Drops on Weak ZEW German Sentiment Report

EUR Drops on Weak ZEW German Sentiment Report

Martin Essex, MSTA, Analyst

EURUSD talking points:

- Data from the ZEW research institute suggests that German investor sentiment has worsened sharply.

- That weakened the Euro as it suggests the European Central Bank will have to be cautious about tightening Euro-Zone monetary policy.

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ZEW reports plunge in German economic sentiment

German investors became much less confident in March according to the country’s ZEW research institute. Its measure of economic sentiment plunged to just 5.1 in March, down from 17.8 in February and well below the 13.0 expected.

There was a drop too in the ZEW current situation index, to 90.7 from 92.3, while its guage of sentiment in the Euro-Zone as a whole fell to 13.4 from 29.3. That sent the Euro down steeply against the US Dollar.

EURUSD Price Chart, Five-Minute Timeframe (March 20, 2018)

EUR Drops on Weak ZEW German Sentiment Report

Chart by IG

Responding to the weak numbers, ZEW said concerns over a US-led global trade conflict have made German investors more cautious and that the strength of the Euro is also clouding the outlook for the German economy. However, the outlook is still largely positive despite the risks, it added.

Euro-Zone monetary policy in focus

Meanwhile, the key driver of the Euro currently remains yesterday’s report from the Reuters newsagency that European Central Bank officials are shifting their debate from bond purchases to the expected path of interest rates.

Previosuly, the ECB was expected to reduce the stimulus it provides to the Euro-Zone economy through its asset-purchase program before increasing interest rates. However, the report suggests that ECB officials could to decide to raise rates sooner than previously expected.

That gave EURUSD a boost and the Euro had largely held on to those gains until the ZEW survey results were announced..

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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