EURUSD--Tuesday Morning, May 20, 2008
ZEW expectations survey came out below expectations, falling to -41.4 from -40.7. Bloomberg consensus was for a rise to -37. Euro had been rallying before the release, steadily making up yesterday's decline. Tthere was some immediate profit taking when the number first came out, but within 10 minutes this sell-off reversed and yesterday's high was surpassed.
The market was primed to rally because of its euro short condition and some quick study found euro friendly details within the ZEW. First, the survey of the current business situation rose, while the consensus expectations were for a small decline. And in fact, currently the German economy is growing quite nicely. Second, the increase in pessimism about the future which led to the fall in the headline number was predicated on an increasingly prevalent view that the ECB will not be lowering rates anytime soon, and in fact, might very likely raise rates.
