The German ZEW indicator, which measures the economic sentiment in the Eurozone’s biggest economy, recorded a marked tumble in January to 8.7 index points, which is way below the consensus estimates.
The indicator had reached a nearly 2-years high in January with the recorded 26.7 index points back then, and the expectations were for a moderate correction to 20.0 in February.
ZEW Economic Sentiment. Image source: TradingEconomics.com
However, the bigger-than-expected drop in February is unsurprisingly caused by the coronavirus panic that has swept the global stock market.
The European economy as a whole, and by that extent the German economy, in particular, is especially susceptible to ripples in the global supply chains – something that is already underscored by international efforts to deter the outbreak of COVID-19.
That is why German investors are becoming increasingly worried that the virus-induced economic slowdown in China is going to have more detrimental spillover impact on the German growth than initially anticipated.
It is because of such fears that the euro continues to be undervalued and to suffer from these heightened external pressures.
The EURUSD is currently consolidating below the major support level at 1.08000 and the regression channel’s middle boundary.
The price had previously bounced back from the resistance level at 1.11986, which is also the 61.8 per cent Fibonacci retracement.
EURUSD 1W Price Chart. Image source: Trendsharks ©, created with TradingView.com
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