German ZEW sentiment falls to 28.1 in October, below forecasts
German investor confidence weakened more than expected in October, with the ZEW Economic Sentiment index dropping to 28.1 from 34.7, missing the 32.0 forecast. The euro briefly weakened against the US dollar before recovering.
The Zentrum für Europäische Wirtschaftsforschung (ZEW) reported that its gauge of institutional investor expectations for Germany fell well short of the consensus estimate, continuing a slide from September’s 34.7 reading.
A separate component tracking current conditions in Germany showed some improvement, climbing to -35.9 from -47.1 the previous month and beating the -45.0 forecast, though the figure remains deeply negative.
Across the wider currency bloc, the ZEW Economic Sentiment reading for the eurozone also came in weaker than anticipated, slipping to 18.5 from September’s 25.8 and undershooting the 24.2 estimate.
EUR/USD dipped sharply around the release but pared the move, trading close to 1.1213 shortly after, with the initial drop attributed more to broad US dollar strength than to the German data itself.
The ZEW survey captures the balance between optimistic and pessimistic institutional investors and is widely watched as an early signal of sentiment toward the German and eurozone economies.
Why it matters: A weaker-than-expected ZEW Economic Sentiment reading can weigh on the euro by denting expectations for eurozone growth and interest rates, with knock-on effects for EUR/USD and European equity indices such as the DAX 40 and Euro Stoxx 50.
Source: FXStreet