German ZEW index drops to ten-month low in August

The initial of the several economic surveys for the month of August due this week was a mixed bag. The German ZEW survey of investor analysts saw the outlook index dropped by the most in thirteen months to a ten-month low of 10, slightly below the long-run average.

While a drop was expected, not least given recent declines in euro area equity indices with which the index is often correlated, the magnitude arguably flags rose investor unease about a potentially dampening impact on economic growth from the strengthening euro, as well as uncertainty about the future direction and efficacy of ECB policy.

However, for some time, investors continue to judge the business climate to be greatly favourable. After falling last month from June’s six-year high, the ZEW’s German current conditions index regained a little of the lost ground, noted Daiwa Capital Markets Research. This suggests that contrary to the current consensus expectation, the more closely-watched German Ifo business climate index might also record a rise in August to a new post-reunification high, added Daiwa Capital Markets Research.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Euro was bullish at 91.7752, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 75.4855. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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