The euro rallied today after the release of positive economic sentiment figures for Germany as well as the whole eurozone. But economists are worried that the eurozone economy is still extremely vulnerable and the improvement of the sentiment does not reflect the underline strength of the economic activity.
The ZEW Indicator of Economic Sentiment for Germany rose sharply from -44.1 to -22.5 in September. That is a far better reading than -38.0 predicted by analysts. ZEW President Professor Achim Wambach commented:
The rise of the ZEW Indicator of Economic Sentiment is by no means an all-clear concerning the development of the German economy in the next six months. The outlook remains negative. However, the rather strong fears that financial experts had in the previous month regarding a further intensification of the trade conflict between the USA and China did not come true. And there is still hope that a no deal Brexit can be avoided. In addition, the European Central Bank is attempting to reduce the economic risks in the eurozone by further easing its monetary policy.
The eurozone economic sentiment improved sharply as well, rising from -43.6 to -22.4. It was also far better than forecasts of -37.4.
The European Parliament approved Christine Lagarde as the new President of the European Central Bank. She should replace current ECB chief Mario Draghi on November 1.
Eurostat will release the final estimate of eurozone inflation in August tomorrow. But the report will likely have a limited impact as traders will focus on Federal Reserve’s monetary policy announcement.
EUR/USD rallied from 1.1000 to 1.1049 as of 14:48 GMT today. EUR/JPY gained from 118.91 to 119.55. EUR/CHF soared from 1.0923 to 1.0987.
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