Market Overview

Germany's Economic Expectations Paint Bright Year Ahead

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The euro remained well above $1.37 on Wednesday morning after Germany's ZEW survey produced far better than expected results.

The Wall Street Journal reported that Germany's economic expectations reached their highest level since April 2006, far surpassing analysts' forecasts. The ZEW sentiment survey climbed to 62.0 points in December from 54.6 in November. Most analysts were expecting a reading of 55.0 points.

See also: #PreMarket Primer for December 18: Markets Holding Breath Ahead of Fed Outcome

The survey proves that investors are quite optimistic about German financial markets in 2014 and added to speculation that the nation's economic growth would pick up in the fourth quarter. Germany's economy slowed a bit in the third quarter, but most except to see considerable expansion moving forward into 2014.

However, gains were mitigated by the European Union's statistics agency Eurostat, which released a report showing that labor costs rose at their slowest rate in three years from July to September. The figures showed that wages were 1.3 percent higher than last year's, while total labor costs were 1.0 percent higher. The data added to concern about the eurozone's incredibly low inflation.

Slowly rising wages suggests that consumer demand will remain low in the near term, which could in turn suppress the bloc's inflation rate. The eurozone is already dealing with a rate of inflation below one percent, which many believe could turn into a period of deflation.

At its November policy meeting, the European Central Bank cut its key interest rate in order to fight the falling inflation. The bank has said it has other tools available should prices continue to fall, but the region's policy makers have been reluctant to use them.

Posted-In: News Eurozone Commodities Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga

 

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