- Economic Sentiment improves in November in Germany and eurozone.
- US Dollar Index slumps to 97.50 area ahead of mid-tier data.
- Focus remains on this week’s ECB and FOMC meetings.
After spending the first half of the day moving sideways near the 1.1060 handle, the EUR/USD pair gained traction in the last hour as the upbeat ZEW data helped ease concerns over a recession in the eurozone and provided a boost to the shared currency. As of writing, the pair was trading at fresh daily highs near 1.1080, adding 0.15% on a daily basis.
December’s ZEW survey revealed that the Economic Sentiment Index in December rose sharply to 10.7 from -2.1 in November to beat the market expectation of 1. Additionally, the same index for the eurozone jumped to 11.2 to surpass experts’ forecast of -17.7 by a wide margin.
Assessing the data, “at first glance, the renewed substantial increase of the ZEW Indicator of Economic Sentiment may seem surprising. It rests on the hope that German exports and private consumption will develop better than previously thought,” noted ZEW President Professor Achim Wambach. “The rather unfavourable figures for industrial production and incoming orders for October, however, show that the economy is still quite fragile.”
Looming central bank meetings limit the pair’s action
On the other hand, the lack of market interest in the greenback helps the shared currency’s performance drive the pair’s action. The US Dollar Index, which tracks the USD’s value against a basket of six major currencies, was last down 0.15% on the day at 97.52. Later in the session, Capacity Utilization and Labor Costs data from the US will be looked upon for fresh impetus but are unlikely to trigger significant movements in the pair ahead of this week’s critical ECB and FOMC meetings.
Previewing the ECB event, “the ECB could announce the launch of a comprehensive review of its monetary policy strategy at this meeting,” said ADB Bank analysts. “The ECB review is expected to be wide-ranging – from the definition of price stability to the tools used to achieve the price stability objective.”
Technical levels to watch for
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