Categories: Economic News

German ZEW economic sentiment falls to levels last seen in 2008

Sentiment worsens citing higher energy costs, reduced profitability

  • EU ZEW Economic Sentiment Index (AUG): -54.9 vs -57 exp
  • German ZEW Economic Sentiment Index (AUG): -55.3 vs -53.8 exp

Customize and filter live economic data using our DaliyFX economic calendar

Energy costs for food in the final result

  • Stubbornly high inflation and a projected rise in energy costs are expected to weaken profits in the private consumption sector
  • Already weak economic growth is expected to continue to decline
  • However, expectations in the financial sector are improving due to the supposed increase in short-term interest rates. The ECB is almost certain to raise rates in September.

Germany’s ZEW figure is closely watched by market participants (traders, analysts, etc.) given the country’s economic importance to the entire Eurozone. The July figure printed below the 2020 low, indicating a bleak economic outlook for the next 6 months.

ZEW Economic Sentiment (Germany)

Source: Refinitiv, prepare for Richard Snow

ZEW’s economic sentiment figure is an aggregation of six-month economic projections from institutional investors and analysts and functions as a leading indicator of good reputation. Data carries a lot of weight in the industry, as forecasts of future financial conditions are made by highly informed people by virtue of their jobs.

Immediate response to the euro

The EUR/USD chart revealed an initial move to the downside, in line with the broader trend, but price action soon recovered to levels seen before the data release. As the data continues to weigh on already weak fundamentals, I would expect the euro to weaken further, especially as the dollar looks set to strengthen after last week’s CPI drop encouraged dollar selling in the light of the alleged “Fed-Pivot” narrative.

EUR/USD 1 minute chart

Source: TradingView, prepare for Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

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