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German and European ZEW Economic Sentiment were very good, yet the Euro doesn’t want to be cheered up. After an initial rise, EUR/USD fell back. Is this the pro-dollar sentiment, or something else in the Eurozone?

German ZEW Economic Sentiment was very surprising. It turned positive, after last month’s negative figure of -3.5. And it also scored 13 points, much more than early expectations of 1.8. Is something good happening in Europe’s biggest economy?

Also the all-European figure was excellent: it rose by 11.8 points, much more than early expectations of 1 point, and much better than last month’s fall of 6.5 points.

The  German ZEW Economic Sentiment is a highly regarded economic indicator, and the Euro reacted immediately. EUR/USD leaped immediately after the release to 1.2989, very close to the round number of 1.3000.

But this was very short lived. It didn’t take long till this popular pair returned to 1.295, the levels before the release. These positive news from Europe didn’t help the common currency.  The previous trading levels, 1.31 to 1.34 won’t return. At least not now.  

The Eruo began declining on Friday, falling below 1.31, but still above 1.30. In the wake of the new forex trading week, the Euro went under, trading in the 1.29s. I must say that all the currencies lost ground to the dollar due to risk aversion. The Pound suffered much more than the Euro yesterday.

But today, it’s a different story – the dollar doesn’t sweep all the currencies today. The Euro had its chance to rise, especially after these positive figures from European consumers.

But something stop the Euro. Fears of deflation? Trichet’s hints about further rate cuts? What is stopping the Euro?

I wonder if the PMI data on Thursday and  German Ifo Business Climate on Friday will trigger similar behavior from the EUR/USD…

Fore more on this week’s upcoming events, check out the Forex Weekly Outlook.

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