German ZEW Economic Sentiment Actual -31.0, Expected -43.5, Previous -45.2

Euro-area ZEW Economic Sentiment Actual -30.8, Expected -46.0, Previous -46.1

Release Explanation: The Zentrum fur Europaissche Wirtschaftsforschung (Center for European Economic Research) report measures investor sentiment. The indicator reflects the difference between the share of Analysts that are optimistic and those that are pessimistic for the expected economic development in the region over the next six months. For example; 60% Optimistic and 40% Pessimistic will lead to a read of +20.

Trade Desk Thoughts: The Zew Economic Sentiment indicator for Germany improved again in January, reaching -31.0 points. The index gained 14.20 points, more than market expectations.

The considerable improvement of the indicator might partly be attributed to the second economic stimulus package of the German government. A separate analysis of the business expectations for particular branches of the economy shows that the surveyed experts reckon with positive effects of the stimulus package especially in the construction sector. Moreover, the ECB policy of lowering interest rates should stabilise the economy.

At the same time, the release showed the economic expectations for the euro zone also improved in January. The Euro-area Zew index gained 15.3 points to -30.8 points. However, the indicator for the economic situation decreased both in the Euro-area and in Germany in January.

Forex Technical Reaction: The euro fell 100 pips overnight, but now the pair is struggling to break below TheLFB S1 (1.2950). Against the swissy, the euro trades flat, even though the pair was trading lower earlier.