Forex Investment and Currency Trading

Germany: ZEW survey (November), Tuesday, 11th, 10:00

The ZEW expectation index fell by almost 20 points to -63 in October, in the midst of one of the worst financial turbulence in history. Since then however, equity markets have recovered slightly, governments and world central banks have shown they are committed to ensure the stability of the financial system and ECB rates are likely to fall below the last cycle’s trough. Inflationary pressures eased on the back of lower oil and commodity prices. However, fears of the recession ahead are likely to dominate respondents’ expectations causing the ZEW expectations index to fall slightly, by perhaps 2 points to -65 in November. This would be a new survey low. Market believes that this index is close to a through, given that the share of the respondents convinced that the economy will worsen reached already the highest share (70%) since the survey started in 1991.

The ZEW current condition index collapsed by 35 points to -36 in October, posting the sharpest decline in the history of the survey. German orders have been falling from 10.6% in January to -4.6% in September on the 3mma y/y measure. The latest IFO and PMI survey confirm that the German and euro area economies are heading towards the worst recession in more than 40 years. The current condition index remains well above its historic low and it could have fallen by perhaps 15 points to -51 in November.

The US index of the ZEW fell sharply in October and it is now close to its 1992 survey low suggesting that the US outlook could be even worse than that of Germany or the overall euro area. Inflation expectations fell across the regions, probably reflecting lower oil and commodity prices and also discounting the worsening economic conditions.