The Euro weakened against the US Dollar after economic data showed that German investor confidence took a tumble in April as the Cypriot bailout and the continually bad prospect for Eurozone growth took its toll on Europe’s largest economy.
According to the ZEW Centre for Economic Research in Mannheim the benchmark index of investor sentiment fell to 36.3 points in April from the 48.5 figure recorded in March. Economists had been expecting a reading of 42. The index of current conditions also fell to 9.2 from 13.6 with 81% of respondents to the survey expecting no change in short-term interest rates over the next six-months.
“Basically, the surveyed financial market experts remain confident, but are less optimistic than they have been in the previous month. The decline in economic sentiment is consistent with the release of economic data that fell short of expectations”, said ZEW President Dr. Clemens Fuest in the release. “German exports into the Eurozone as well as the rest of the world have declined, for instance. The debt crisis in the Eurozone is still unresolved and causes uncertainty.”
Other data showed that inflation eased across the Eurozone in March after being spurred on by a downward trend in energy prices. The regions annual inflation figure fell to 1.7% in March, its lowest level since August 2010 coming close to the European Central Banks target of 2%. Easing inflation and the weak economy could provide extra motivation for European central bankers to consider lowering rates when they meet on May 2, with some economists citing the bloc’s rigid inflation target as hampering a return to economic expansion after three years of debt crisis.
Some economists are expecting the ECB to cut interest rates from the already record low of 0.75% to 0.50% by the middle of the year.
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