This morning’s ZEW economic sentiment reports out of Germany and the broader euro zone came in below expectations, but so far the news has had little effect on the value of the EUR.
Traders had turned their attention on the interest rate differential between the euro zone and the United States yesterday following the publication of solid CPI figures in Europe and soft investment data in the US. The result had been for the EUR/USD to move back into a bullish posture from last week’s downturn.
So far this week, the EUR/USD pair has shifted from its recent low of 1.4050 to its current price of 1.4205. The EUR/GBP has witnessed similar behavior, with the pair shifting back into a minor bullish uptick from 0.8670 to its current value near 0.8740.
The ZEW reports are leading indicators of economic health. They are based on a diffusion index of surveyed analysts and investors across the region. The number released in the report is a gauge of consumer sentiment. Above 0.0 represents optimism, below that mark represents pessimism.
While the report showed continuation of optimism in Germany and the euro zone, the number is rapidly approaching the zero mark. Debt woes from Greece and Portugal have been striking front page headlines these past several weeks and many investors have shown a tendency to move into the safer USD and Swiss franc (CHF) as a hedge against uncertainty.
The EUR does not appear to have been affected too strongly by this shift in sentiment, though the release of afternoon data from the United States could be enough. Forex traders will definitely want to be active on their trading platforms today.
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