Euro Vulnerable to German ZEW Survey, Italy Industrial Orders?

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

You can manage your subscriptions by following the link in the footer of each email you will receive

EURO TALKING POINTS – EUR/USD, GERMAN ZEW SURVEY, ITALY INDUSTRIAL ORDERS

See our free guide to learn how to use economic news in your trading strategy!

The Euro may slide if Germany’s ZEW Survey – a measure used to gauge the expectation for economic growth – falls short of the already-negative 13.6 forecast. The currency may also face additional downward pressure if Italian industrial orders data indicates growth is weaker than expected. Because Italy is in a technical recession, every underperforming report will likely only compound risk aversion toward Italian assets.

Doubt over the underlying strength in the Italian economy – and European growth – is seen by the spread between Italian and German bond yields. Since April, the spread has widened over 100 percent, especially during the battle of budgets between Rome and Brussels.

However, even though German bonds are generally viewed as an anti-risk asset, recent data has revealed that not even the steam engine of European growth is immune. Seasonally adjusted quarter-on-quarter GDP came in at 0.0% percent, undershooting the 0.1 percent forecast with the previous at -0.2 percent. If the German economy contracted, it would have then satisfied the technical definition of a recession.

Or to put it another way, two out of the three largest Eurozone economies would each be experiencing a contraction for two consecutive quarters, with France not far behind.

Adding fuel to the fire, Lega Nord lawmaker – one of Italy’s ruling populist parties – sent Italian bond yields higher on Friday after he threatened Italy’s membership in the Eurozone. “[E]ither we succeed in changing Europe now or we will have to leave”, referring to the upcoming European Parliamentary elections in the spring. Eurosceptic and anti-establishment parties are gaining momentum as the voting day approaches.

Even though such comments from him are not unusual, markets appear to be more skittish on potential triggers that could further weigh on the outlook for growth in the EU. This primarily has to do with the ever-increasing fragility of European affairs – politically and economically.

Looking ahead, this week Eurozone manufacturing PMI, CPI and other typically market-moving data will be released and will likely impact EUR/USD. The ongoing Brexit negotiations is still a major risk factor with fears of a potential reignition of a US-EU trade conflict rising.

EUR/USD may – depending on the magnitude of the reports – flirt with 1.1269. However, a potential counter-boost may be Wednesday’s release of the FOMC meeting minutes. If the text shows a strongly dovish disposition from the Fed, it may exert downward pressure on the US Dollar and push the pair higher. Leading up to these major releases, the pair might tread water as investors hold their breath and wait for the outcomes.

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

provides forex news and technical analysis on the trends that influence the global currency markets.

A demo account is intended to familiarize you with the tools and features of our trading platforms and to facilitate the testing of trading strategies in a risk-free environment. Results achieved on the demo account are hypothetical and no representation is made that any account will or is likely to achieve actual profits or losses similar to those achieved in the demo account. Conditions in the demo account cannot always reasonably reflect all of the market conditions that may affect pricing and execution in a live trading environment.