To help you make sense of economic indicators, I have opted to organize today's Piponomics in a neat little FAQ. I even made a nice image for those of you who like them pretty pictures.
There are basically two types of answers. The first is a straight-from-the-book and technical answer for all you economics junkies. The second is a "street" answer" for my homies who wanna keep it real and simple.
Formal Answer: ZEW stands for Zome European Words. Naw, I'm just kidding. Zentrum für Europäische Wirtschaftsforschung and it is a center for European Economic Research. The survey is what you'd call a "leading indicator," which means it is used to predict how the economy will perform over the next couple of months. To be specific, the survey measures the 6-month outlook for the euro zone based on the following factors like interest rates, industry growth, sentiment, etc.
Street Answer: It measures how awesome or crappy investors, analysts, and economists believe the euro zone will be over the next 6 months.
Formal Answer: The line in the sand is 0.0. What this means is that scores above this level indicates that the survey respondents were optimistic about the outlook, while scores below this mean that the respondents were pessimistic.
Street answer: 0.0 = Emotionless Kristen Stewart. Above 0.0 = Internet Star Jennifer Lawrence. Below 0.0 = Lindsay Lohan's successor, Miley Cyrus.
Formal Answer: The main reason why the ZEW reports highlight the German economy is because it's the largest economy in the euro zone. Furthermore, German officials normally have the biggest pull in terms of political might and for the most part, set the direction that the euro zone is headed in.
Street answer: Germany is just like Superman. Strong. Powerful. A leader. Without Superman, there is no Justice League. Same goes with Germany - without the economic powerhouse, there is no euro zone.
Formal Answer: The trend in the ZEW report has been followed by a similar move in EUR/USD at least eight times in the past 10 years. I dunno about you, but that's way too many times to be just a coincidence!
If you think about it though, this makes fundamental sense. If the euro zone is doing well, it will most likely lead to an increase in spending and consumption, which in turn will give GDP a boost. For the most part, this is bullish for the euro.
On the other hand, if the euro zone isn't performing, investors will become more pessimistic and chances are that the euro will fall.
Street Answer: It's as simple as 1-2-3, baby! If the ZEW is on the rise, load up on the euro. If the ZEW is trending lower, dump the euro like an ex-girlfriend.
There are basically two types of answers. The first is a straight-from-the-book and technical answer for all you economics junkies. The second is a "street" answer" for my homies who wanna keep it real and simple.
What exactly is the ZEW Economic Expectations report?
Formal Answer: ZEW stands for Zome European Words. Naw, I'm just kidding. Zentrum für Europäische Wirtschaftsforschung and it is a center for European Economic Research. The survey is what you'd call a "leading indicator," which means it is used to predict how the economy will perform over the next couple of months. To be specific, the survey measures the 6-month outlook for the euro zone based on the following factors like interest rates, industry growth, sentiment, etc.
Street Answer: It measures how awesome or crappy investors, analysts, and economists believe the euro zone will be over the next 6 months.
How is the ZEW report measured?
Formal Answer: The line in the sand is 0.0. What this means is that scores above this level indicates that the survey respondents were optimistic about the outlook, while scores below this mean that the respondents were pessimistic.
Street answer: 0.0 = Emotionless Kristen Stewart. Above 0.0 = Internet Star Jennifer Lawrence. Below 0.0 = Lindsay Lohan's successor, Miley Cyrus.
Why the focus on Germany?
Formal Answer: The main reason why the ZEW reports highlight the German economy is because it's the largest economy in the euro zone. Furthermore, German officials normally have the biggest pull in terms of political might and for the most part, set the direction that the euro zone is headed in.
Street answer: Germany is just like Superman. Strong. Powerful. A leader. Without Superman, there is no Justice League. Same goes with Germany - without the economic powerhouse, there is no euro zone.
How effective is the ZEW report as a leading indicator?
Formal Answer: The trend in the ZEW report has been followed by a similar move in EUR/USD at least eight times in the past 10 years. I dunno about you, but that's way too many times to be just a coincidence!
If you think about it though, this makes fundamental sense. If the euro zone is doing well, it will most likely lead to an increase in spending and consumption, which in turn will give GDP a boost. For the most part, this is bullish for the euro.
On the other hand, if the euro zone isn't performing, investors will become more pessimistic and chances are that the euro will fall.
Street Answer: It's as simple as 1-2-3, baby! If the ZEW is on the rise, load up on the euro. If the ZEW is trending lower, dump the euro like an ex-girlfriend.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Japanese Yen trades just shy of 157.00 versus the USD
The Japanese Yen weakens across the board after BoJ announced its policy decision. A shortlived spike in the Yen may be testament to an attempt by the Japanese authorities to intervene. US PCE Price Index shows higher-than-expected inflation but does little to impact USD/JPY which almost touches 157.00.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.
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