Forex News – ZEW investor sentiment survey climbs to 3 ½ – year high
October 15, 2013 2:14 pm
(ZEW Economic Sentiment, Source: Reuters)
The release of today’s ZEW investor sentiment saw the index climb to 52.8, which represents a 3 ½ – year high. While the main focus of attention continues to be the United States and the negotiations to end the standoff between Republicans and Democrats, the signs of a slow economic recovery for Germany and the Eurozone as a whole continue.
During its latest World Economic Outlook publication (October 2013), the IMF projected a GDP contraction of 0.5% during 2013 for the Eurozone followed by growth of 1.0% in 2014. These growth rates can be characterized as particularly slow – showing almost stagnation – but it is probably the best that the Eurozone can hope for given that a number of its members are undergoing painful fiscal consolidation and implementing difficult structural changes.
It is worth noting that for Germany the projections are for a growth rate of 0.5% for 2013 and 1.4% for 2014, again very mediocre but still much better than say, Spain with a forecast of a contraction of 1.3% for 2013 followed by an anemic expansion of 0.2% for 2014.
Given the difficult but overall slightly positive conditions for the Eurozone, two interesting questions arise.
Firstly, have the markets discounted too much in terms of economic vitality for the region? The Eurostoxx 50 was set to scale the 3000 mark on Tuesday, up 13.5% on the year and at a level last seen in May 2011 before the Greek debt haircut and before markets had started to ask existential questions about the euro and its make-up.
The second interesting question – particularly to foreign exchange market participants – is whether the Eurozone can withstand any sustained rally in the euro given the focus of the periphery on structural reforms, regaining competitiveness and austerity which subdues domestic demand. Germany can probably remain competitive at higher levels of the euro but what about the struggling periphery?
(ZEW Economic Sentiment, Source: Reuters)
The release of today’s ZEW investor sentiment saw the index climb to 52.8, which represents a 3 ½ – year high. While the main focus of attention continues to be the United States and the negotiations to end the standoff between Republicans and Democrats, the signs of a slow economic recovery for Germany and the Eurozone as a whole continue.
During its latest World Economic Outlook publication (October 2013), the IMF projected a GDP contraction of 0.5% during 2013 for the Eurozone followed by growth of 1.0% in 2014. These growth rates can be characterized as particularly slow – showing almost stagnation – but it is probably the best that the Eurozone can hope for given that a number of its members are undergoing painful fiscal consolidation and implementing difficult structural changes.
It is worth noting that for Germany the projections are for a growth rate of 0.5% for 2013 and 1.4% for 2014, again very mediocre but still much better than say, Spain with a forecast of a contraction of 1.3% for 2013 followed by an anemic expansion of 0.2% for 2014.
Given the difficult but overall slightly positive conditions for the Eurozone, two interesting questions arise.
Firstly, have the markets discounted too much in terms of economic vitality for the region? The Eurostoxx 50 was set to scale the 3000 mark on Tuesday, up 13.5% on the year and at a level last seen in May 2011 before the Greek debt haircut and before markets had started to ask existential questions about the euro and its make-up.
The second interesting question – particularly to foreign exchange market participants – is whether the Eurozone can withstand any sustained rally in the euro given the focus of the periphery on structural reforms, regaining competitiveness and austerity which subdues domestic demand. Germany can probably remain competitive at higher levels of the euro but what about the struggling periphery?
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