Euro Advances Toward Weekly Highs as German Sentiment Surges

Key Moments

Euro Strengthens on Robust German ZEW Readings

The Euro (EUR) edges higher against the British Pound (GBP) on Tuesday, supported by stronger-than-expected German sentiment data, while UK labor numbers fail to provide a clear boost to Sterling. The EUR/GBP pair rises to intraday highs at 0.8555, bringing it close to the upper end of the week’s trading range around 0.8560.

Figures from the ZEW Institute released on Tuesday show that the German Economic Sentiment Index increased to 34.2 in August, up from 26.3 in July and ahead of the 30 consensus forecast. The survey points to better forward-looking assessments across all sectors, as the German economy continues to draw support from government infrastructure initiatives. At the same time, the report highlights that record low water levels on the Rhine represent a significant risk to economic activity.

Institutional investors’ view of the current German economic environment also improves. The assessment of the present situation rises to -61.1 in August, compared with -77.6 in July, and comes in stronger than expectations of -68.8. This marks the best reading since July of the previous year, according to the survey.

Expectations for the broader Eurozone economy brighten as well. The ZEW expectations measure for the Eurozone climbs to 31.4 in August, from 23.4 a month earlier, easily surpassing market forecasts of 25.4.

UK Labor Data Offer Mixed Picture for Sterling

In the United Kingdom, data released earlier on Tuesday show that the ILO Unemployment Rate held at 4.9% in the three months to June, unchanged from the prior period and above projections for a modest decline to 4.8%. While employment growth slows, an unexpected drop in the number of claimants helps offset some of the negative implications for the Pound.

Wage dynamics show a modest improvement. Pay growth increases to 3.5% on a year-on-year basis after remaining at 3.4% over the previous three months, according to the latest release.

ZEW Economic Sentiment – Germany and Eurozone

The ZEW Survey – Economic Sentiment is a key gauge of institutional investor confidence, capturing the difference between the share of investors who are optimistic and those who are pessimistic. The latest releases for Germany and the Eurozone are summarized below.

Definition of the ZEW Economic Sentiment Survey

The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic. Generally speaking, an optimistic view is considered as positive (or bullish) for the EUR, whereas a pessimistic view is considered as negative (or bearish).

The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic. A positive number means that the share of optimists outweighs the share of pessimists. Usually, an optimistic view is considered as positive (or bullish) for the EUR, whereas a pessimistic view is considered as negative (or bearish).