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 stays defensive below 1.1900 as USD recovers
EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.
GBP/USD holds above 1.3600 after UK data dump
\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.
Japanese Yen strengthens on renewed verbal intervention
USD/JPY extends its losses for the fourth successive session, trading around 152.90 during the Asian hours on Thursday. The pair weakens as the Japanese Yen strengthens following renewed verbal intervention from Tokyo.
Editors’ Picks
GBP/USD holds above 1.3600 after UK data dump
\GBP/USD moves little while holding above 1.3600 in the European session on Thursday, following the release of the UK Q4 preliminary GDP, which showed a 0.1% growth against a 0.2% increase expected. The UK industrial sector activity deteriorated in Decembert, keeping the downward pressure intact on the Pound Sterling.
EUR/USD stays defensive below 1.1900 as USD recovers
EUR/USD trades in negative territory for the third consecutive day, below 1.1900 in the European session on Thursday. A modest rebound in the US Dollar is weighing on the pair, despite an upbeat market mood. Traders keep an eye on the US weekly Initial Jobless Claims data for further trading impetus.
Gold sticks to modest intraday losses as reduced March Fed rate cut bets underpin USD
Gold languishes near the lower end of its daily range heading into the European session on Thursday. The precious metal, however, lacks follow-through selling amid mixed cues and currently trades above the $5,050 level, well within striking distance of a nearly two-week low touched the previous day.
Cardano eyes short-term rebound as derivatives sentiment improves
Cardano (ADA) is trading at $0.257 at the time of writing on Thursday, after slipping more than 4% so far this week. Derivatives sentiment improves as ADA’s funding rates turn positive alongside rising long bets among traders.
A tale of two labour markets: Headline strength masks underlying weakness
Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.
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