Despite a mild improvement last month, investor sentiment throughout the Euro-zone is anticipate to deteriorate as the ZEW survey is forecasted to fall to a record low of -42.0 from -41.4. The news will not be entirely surprising, as the European Commission’s most recent surveys of economic, industrial, and services sector confidence all dropped more than expected.
| 11-Mar | Euro-zone ZEW Survey (MAR) (10:00 GMT; 05:00 EST) | German ZEW Survey (MAR) (10:00 GMT; 05:00 EST) |
| Expected: -42.0 | Expected: -40.0 | |
| Previous: -41.4 | Previous: -39.5 |
What Are The Markets Facing?
Despite a mild improvement last month, investor sentiment throughout the Euro-zone is anticipate to deteriorate as the ZEW survey is forecasted to fall to a record low of -42.0 from -41.4. The news will not be entirely surprising, as the European Commission’s most recent surveys of economic, industrial, and services sector confidence all dropped more than expected. Indeed, building price pressures are hurting disposable income for consumers and denting profit margins for businesses, and things are only getting worse. The European Commission’s flash estimate for February CPI held at a 14-year high of 3.2 percent, which leaves the European Central Bank very little room for maneuver regarding monetary policy. Indeed, given ECB President Jean-Claude Trichet’s press conference comments last week, it appears that the central bank remains staunchly hawkish tone as he said, “The latest information has confirmed the existence of strong short-term upward pressure on inflation...The economic fundamentals of the euro area are sound...Yet the level of uncertainty resulting from the turmoil in financial markets remains high. Against this background, we emphasize that maintaining price stability in the medium term is our primary objective in accordance with our mandate.” Another major issue for investors is the value of the euro, as its rapid appreciation to record highs hurts prospects for export growth. On the other hand, the strong currency is helping to offset import price inflation, which is likely why Trichet has only resorted to mild verbal intervention. Overall, Tuesday’s sentiment data will likely highlight the dim prospects for the Euro-zone, and if the figures are worse-than-expected, markets may start to bet that the ECB will seriously consider cutting rates as soon as CPI eases back.
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