Germany ZEW sentiment edges higher but misses expectations

• German economic sentiment improves slightly in September but falls short of market expectations.
• Germany’s assessment of current economic conditions improves sharply and beats forecasts.
• Eurozone economic sentiment deteriorates unexpectedly, contrasting with expectations for a strong improvement.

Germany’s ZEW Survey Economic Sentiment rose slightly to 34.7 in September from 34.2 in August, although the reading falls short of market expectations of 37.

The assessment of Germany’s current economic conditions delivers a more encouraging signal. The Current Situation index improved sharply to -47.1 from -61.1 in August, beating expectations of -52.2.

The picture is less favorable for the broader Eurozone. The Eurozone ZEW Survey Economic Sentiment fell to 25.8 in September from 31.4 in the previous month. The decline comes as a significant disappointment, with markets expecting the indicator to rise to 39.9.

ZEW President Professor Achim Wambach described economic sentiment as broadly stable and said experts remain “cautiously optimistic” about an economic recovery. Wambach notes that fiscal measures continue to support growth, while export momentum provides an additional boost.

However, the ZEW President warns that risks to the outlook remain considerable, citing persistently high energy prices linked to the ongoing war in Iran as well as additional uncertainty generated by hybrid attacks.

Market reaction

The Euro (EUR) remains under downward pressure on Tuesday, with EUR/USD trading around 1.1535 at the time of writing, down 0.12% on the day.