Euro-Zone Confidence Takes a Knock in March
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EURUSD talking points:
- The European Commission’s business climate index fell in March to a lower-than-expected 1.34.
- Indicators for economic, industrial, and services confidence also missed their predicted levels.
- EURUSD weakened in response.
- See above for a recording of my webinar on market and trader confidence more generally.
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Confidence weakens in the Euro-Zone
Euro-Zone sentiment worsened this month, according to data from the European Commission. Economic, industrial and services confidence all came in down from February and below predicted levels, while consumer confidence was unchanged. The business climate in the area worsened too, coming in at 1.34, below both February’s 1.48 and the forecast 1.36.
In response, EURUSD dropped back, extending earlier falls after gaining ground both on Friday and yesterday on concerns about a potential trade war between the US and China – concerns that are now showing signs of dissipating.
EURUSD Price Chart, Five-Minute Timeframe (March 23 – March 27, 2018)
Chart by IG
“The deterioration of euro-area sentiment resulted from drops in industry, services and retail trade,” noted the Commission. “Confidence among consumers remained unchanged, while it increased among construction managers. The ESI [economic sentiment indicator] weakened in all the five largest euro-area economies; significantly so in Germany (-2.4), Italy (-1.8) and Spain (-1.2) and, less so, in the Netherlands (-0.5) and France (-0.4).
Meanwhile, employment plans saw an upward revision in services and construction, while they worsened markedly in retail trade and, to a lesser extent, in industry. Selling price expectations increased slightly in retail trade and more importantly in construction, while they decreased in industry and services. Also consumer price expectations dropped in March.
UK sentiment worsens
As for the European Union as a whole, the marginally stronger decrease in the headline indicator for the EU (-1.9) was mainly due to the marked deterioration of sentiment in the largest non-euro area EU economies, the UK (-4.2), and Poland (-2.0), the Commission said.
“In line with the euro area, confidence deteriorated strongly in industry, services, and retail trade, while it increased slightly in the construction sector and remained unchanged among consumers. The fall in EU confidence in the financial services sector was slightly less pronounced than in the euro area. By contrast to the euro area, EU managers' employment expectations improved in retail trade, while they remained broadly stable in services. Price expectations differed from the euro area mainly in retail trade, where they decreased markedly,” the Commission reported.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.