The German ZEW investor confidence survey is expected to increase to 2.0 from -3.2 in March, which would be the first positive reading since July 2007 however, as European Central Bank President Jean-Claude Trichet remains reluctant to overshoot the interest rate, fears of a protracted economic downturn may weigh on investors as the region faces its worst recession since World War II.
Trading the News: German ZEW Survey
What’s Expected
Time of release: 04/21/2009 09:00 GMT, 05:00 EST
Primary Pair Impact : EURUSD
Expected: 2.0
Previous: -3.5
mpact the German ZEW Survey report had over EURUSD for the past 2 months
March 2009 German ZEW Survey
| Investor sentiment in Germany unexpectedly rose to its highest level in nearly two-years as the ZEW survey increased to -3.5 from -5.8 in February. Meanwhile, the gauge which evaluates the current situation of the economy fell to -89.4 from -86.2 in the previous month, and conditions may get worse as Europe’s largest economy faces a deepening recession. As the European Central Bank forecasts the annual rate of growth for the euro-region to contract 2.7% this year, and expects economic activity to remain subdued in 2010, the governing board is anticipated to lower the benchmark interest rate further in an effort to stem the downside risks for growth and inflation. As a result, investors are pricing another 25bp rate cut by the ECB next month however, as President Trichet remains reluctant to overshoot the interest rate, the central bank may adopt additional policy tools as the economic downturn intensifies. | |
February 2009 German ZEW Survey
| The German ZEW investor confidence survey increased to -5.8 from -31 in January to mark the biggest advance since July 1993 as policymakers continue to take unprecedented steps to shore up the economy, and the European Central Bank is widely expected to ease policy further in the month ahead as the region faces its worst economic downturn since World War II. Despite the improved outlook held by investors, a gauge measuring the current situation slipped to a five-year low of -86.2 from -77.1 in the previous month, and economic activity in Europe’s largest economy is likely to deteriorate further as the IMF forecasts the annual rate of growth to contract 2.5% this year. As a result, the ECB is widely expected to lower the key rate by another 50bp on March 5 to a record-low of 1.50% as the outlook for growth and inflation remains bleaks, and may adopt additional tools to stimulate the ailing economy as the interest rate falls close to zero. | |
What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:
| Bullish Scenario:
If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release. | Bearish Scenario: |
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