EUR/USD: Euro Remains Bearish as Economic Woes Deepen

Concerns over the Euro Zone economy are presumed to continue weighing on the Euro in today’s exchanges after a weak German business confidence data highlighted the rising pain in the region’s stronger economies. Today, another report is set to reveal that industrial production fell in the bloc, further suggesting that the debt crisis is hampering growth.

Economic expectations in Germany declined well below forecasts in November, the latest grim sign that the region’s largest economy is feeling the blow as the debt crisis drags on. The ZEW said that its German ZEW Economic Sentiment dropped from -11.5 points in October to -157 points in November, defying forecasts of a modest rise to a rating of -9.9. The decline in economic sentiment dashes hopes that the German economy will be able to escape the broader slowdown in the Euro Zone, and could suggest that a contraction could be on the cards in the current quarter. Last Friday, the German economics ministry forecast the economy to weaken “noticeably” during the winter months, on companies holding back investments amid the debt turmoil. As such, according to analysts, the report all the more signifies that the tomorrow’s GDP report for Q3 is set to a second consecutive quarterly growth slowdown.

Today, Eurostat is believed to report that Industrial Production in the currency union dropped by a considerable 1.6 percent in September, overturning a 0.6 percent increase recorded in the prior month. Weaker demand from its neighbors in the region and low levels of business confidence likely reduced orders for German goods, forcing a contraction in industrial output. With the growth outlook for the region continuing to dim, the single currency is deemed to decline today.

Likewise, lingering concerns over Greece are presumed to weigh on Euro sentiment. According to a statement read by Luxembourg Prime Minister Jean-Claude Juncker at the conclusion of gathering in Brussels this week, finance ministers from the Euro Zone will meet again on November 20 to discuss Greece’s financing needs. More specifically, officials remain at odds over a long-term target to bring Greece’s debt down. International Monetary Fund Director Christine Lagarde disagreed with a decision by the officials to postpone the goal of getting debt down to 120 percent by two years, until 2022. With the fate of Greece still uncertain, a short position is advised for the EUR/USD trades today.

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