EUR/USD languishes below 1.1850 following weak Eurozone sentiment data

• EUR/USD remains capped below 1.1850, in a downtrend from last week's highs at 1.1925.
• German and Eurozone Economic Sentiment Index deteriorated against expectations in February.
• The US Dollar shows a mild upside bias ahead of key US data due later in the week.

The Euro (EUR) remains offered against the US Dollar (USD) for the second consecutive day on Tuesday. The pair’s recovery attempt from fresh one-week lows at 1.1828 remains capped below the 1.1850 line so far, amid a broader downtrend from 1.1925 highs last week. The downbeat ZEW Economic Sentiment Survey released earlier on Tuesday has failed to support the common currency.

Institutional investors’ sentiment about the German economy deteriorated to 58.3 in February from 59.6 in January, below market expectations of an improvement to 65.0, according to data from the ZEW survey released earlier on Tuesday. The confidence about the current economic situation improved to -65.9 from -72.7 in January, but it fell short of the -65.7 market consensus.

Likewise, the Eurozone’s Economic Sentiment Index fell to 39.4 in February, from 40.8, instead of improving to 45.2 as markets had anticipated.

Earlier on the day, the German Harmonised Index of Consumer Prices (HICP) confirmed that inflation contracted 0.1% for the second consecutive month in January, while year-on-year, consumer prices grew 2.1%, unchanged from December. These figures add pressure keep the speculation about further European Central Bank monetary easing alive, and add bearish pressure on the Euro.

The Greenback, on the other hand, maintains a mild bullish tone this week with trade volumes thin as US markets return from a long weekend. Later on Tuesday, the New York Empire State Manufacturing Index might provide some guidance to the USD. Investors, however, might keep a wait-and-see stance ahead of the release of the minutes of the latest Federal Reserve (Fed) meeting, due on Wednesday, and Gross Domestic Product (GDP) and Personal Consumption (PCE) inflation figures, on Friday.