Last month we saw the German ZEW economic sentiment index drop sharply to -8.2 as business leaders became increasingly concerned over the threat of a trade war. Trump’s decision to impose tariffs on steel and aluminium imports could yet have significant repercussions for everyone involved and this, coupled with some disappointing economic data from the eurozone, led to a drop in confidence.
As a survey of up to 300 experts from banks, financial departments and insurance companies, the ZEW index is seen as a leading indicator for Germany’s economy. The figure is actually expected to remain at -8.2, but there will be those hoping for a recovery. We will also see the GDP growth rate from Germany and the eurozone, as well as industrial production figures for March. These are expected to push much higher than before and we could see some euro movement depending on what the figures suggest.
Speaking of the euro, it traded sideways against sterling throughout yesterday, but it did manage to make some gains against the dollar. It has still not breached the $1.20 figure we last saw towards the end of April, but that won’t cause the European Central Bank any sleepless nights.
Finally, it is worth mentioning that there is an increased possibility of a populist government in Italy. The anti-establishment Five Star Movement and the far-right League are on the brink of power, but it did little to the markets. It should serve as testament to what the world is like right now – there was a time when such news would have rattled the markets, but everyone appears to have taken the news in their stride. We live in extraordinary times where nothing appears out of the ordinary anymore.