Economic Sentiment Deeply Negative in Europe, but Expectations Improve

The economy of the Eurozone is heading toward recession again, with services having already been in a slump for several months now. The new restrictions in recent months are having a major negative impact once again, which is showing in the current economic sentiment.

The sentiment has deteriorated further in Germany, falling to -66.5 points this month, but at least expectations have improved massively, from 39 points to 55. This shows that economists expect an improvement in the Eurozone economy from January, which should be positive for the Euro if it materializes.

German December ZEW Economic Sentiment

The jump in the expectations component is what stands out in the report, as ZEW notes that the announcement of imminent vaccine approvals has made market experts more confident about the future outlook. Once again, this feeds into the narrative that the market continues to be largely more forward-looking, and that will dictate sentiment in risk trades in the big picture.