The ZEW European Economic Research Centre showed a high degree of optimism by investors and analysts concerning the prospects of the German economy. The Economic Sentiment index jumped to 19.2 in June from 6.4 the previous month. The expectation was for the index to drop to 4.7. Economic sentiment was at its highest since August 2015. The current conditions index showed less improvement as it rose from 53.1 to 54.5.
The figures were a vote of confidence in the German economy, in the face of uncertainties such as slowing global growth and the UK’s in-out referendum on EU membership on Thursday. The survey was released ahead of a flurry of business confidence surveys this week such as the Markit flash PMIs on Thursday and the IFO business confidence number on Friday. The remaining business confidence surveys are expected to show a slight reduction from the previous month’s levels. Overall business confidence in Germany has been healthy in recent months, although the rest of the Eurozone and particularly the periphery seem to be lagging. German economic growth is expected to be around 1.7% this year and the next.
Given that the German economy is outperforming the others in the Eurozone, strong German numbers do not seem to be helping the euro higher as much. This despite the fact that Germany is the single currency area’s largest economy. Euro / dollar traded steady at 1.1340 following the announcement, although it dipped later to below 1.13.
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