Euro edges up to 1.1420 as Eurozone Economic Sentiment beats expectations

EUR/USD edges up above 1.1420, trimming losses after a three-day reversal.
German and Eurozone Economic Sentiment figures improved beyond expectations in July.
Hopes of a new ceasefire in Iran have provided some support to the Euro.

Guillermo Alcala FXStreet

The Euro (EUR) edges up against the US Dollar (USD) on Tuesday, returning to levels just above 1.1420 after a three-day reversal from last week's highs at 1.1480 found support at 1.1400. Positive Eurozone sentiment figures and reports of diplomatic efforts to achieve a ceasefire in Iran are providing some support to the Euro and weighing on the USD.

Data released by the ZEW Institute on Tuesday revealed that institutional investors' sentiment about the German economy improved to 26.3 in July, their best reading since February, before the war in Iran started, from 10.5 in June. Likewise, the Eurozone sentiment rose to 23.4 from 9.5 in the previous month. These figures beat expectations of 18 and 11.2, respectively.

Investors' confidence in the current economic situation, however, remains grim, according to the ZEW survey. The index measuring this improved to -77.6 from -81 in June, also beating expectations of a -77,8 reading, but remains close to the historic lows.

Ceasefire hopes are keeping USD bulls in check

US and Iran ramped up their hostilities over the weekend, heightening concerns that the conflict might escalate out of control, and keeping investors’ appetite for risk subdued. The Strait of Hormuz is practically closed, and the Iran-backed Houthis announced a blockade to Saudi Arabian vessels in the Red Sea, which is likely to boost concerns about a crude oil shortage,

Risk aversion, however, remains contained amid hopes of another ceasefire. Axios reported earlier on Tuesday that Trump's administration is reviewing a proposal submitted by mediators from Qatar, Pakistan and Egypt that could avoid a full-blown war.

In Europe, the focus now is on the European Central Bank’s (ECB) Monetary Policy decision on Thursday. The bank is widely expected to leave rates on hold, but traders are pricing another rate hike in September, and they will be eager to spot some signals in that direction at ECB President Christine Lagarde's press conference.

The US economic calendar is thin on Tuesday and during the rest of the week. The only event worth mentioning will be the preliminary S&P Global Manufacturing and Services Purchasing Managers' Index (PMI) figures, due on Friday.

Economic Indicator

ZEW Survey – Economic Sentiment

The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic. Generally speaking, an optimistic view is considered as positive (or bullish) for the EUR, whereas a pessimistic view is considered as negative (or bearish).

Economic Indicator

ZEW Survey – Economic Sentiment

The Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic. A positive number means that the share of optimists outweighs the share of pessimists. usually, an optimistic view is considered as positive (or bullish) for the EUR, whereas a pessimistic view is considered as negative (or bearish).

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