Euro remains depressed as Eurozone sentiment and trade data fail to inspire

EUR/USD remains on its back foot, with monthly lows near 1.1520 under pressure.
A tepid German ZEW Economic Sentiment Report and bright Eurozone Trade Balance figures have failed to lift the Euro.
The Dollar remains buoyed as investors brace for the first Fed rate hike in three years.

Guillermo Alcala FXStreet

The Euro (EUR) remains on the defensive against the US Dollar (USD) as investors brace for the first interest rate hike by the US Federal Reserve (Fed) after three years. Mixed Eurozone economic sentiment and trade balance figures have failed to lift the EUR/USD, which trades just above monthly lows near 1.1520, after having depreciated for the last four days

Data released by the ZEW Institute on Thursday revealed that the German Economic Sentiment remained stable in September, with the Index ticking up 0.5 to 34.7, but below market expectations of a larger improvement, to 37. The index that measures the current economic situation has improved to -47.1 from -61.1 in August, beyond the .52.2 expected by the market, although it remains at negative levels.

The report shows cautious optimism about the economic recovery, with fiscal measures and strong export momentum bolstering growth, although it warns about looming risks, namely the persistently high energy prices and the uncertainty caused by hybrid attacks.

At the same time, Eurostat has released July’s Trade Balance figures, which show a EUR 14.2 billion surplus, beating expectations of a EUR 3.7 billion net profit, after a downwardly revised EUR 7.2 billion surplus in June.

Fed hiking bets are boosting the US Dollar

The US Dollar, on the other hand, remains buoyed by rising bets of a Federal Reserve (Fed) quarter-point hike on Wednesday. According to ING Analyst Francesco Pesole, “yesterday, the dollar finally caught up with the tailwinds we’ve highlighted over the past couple of weeks: supported front-end rates, high oil prices, and a soft risk environment.”

Looking ahead, Pesole expects some consolidation in the very near term, suggesting the Dollar “may stay in tighter ranges until the FOMC delivers its verdict tomorrow evening,” and appreciate further later on, as “the broader backdrop keeps the odds in favour of further dollar gains.”

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

Trade Balance n.s.a.

The Trade Balance released by the Eurostat is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the EUR. Generally, if a steady demand in exchange for exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the EUR.

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