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EU Session: Eurozone, German ZEW Survey in Spotlight

February 18, 2014

A widely followed index of German business optimism is expected from the euro-area later on Tuesday, amidst the mounting fears in Italy as new Prime Minister Matteo Renzi seeks to form a new government. Traders will be looking for further signs of economic recovery at the start of 2014. Italian President Giorgio Napolitano on Monday asked Matteo Renzi, to from the country`s new government after a party coup forced Enrico Letta to resign, making him the youngest prime minister ever. On Monday, Renzi got the green light to form a new government within 24 hours, where he is expected to propose a program of reforms to be completed over the next few months. The country`s closely followed ZEW indicator of economic sentiment will be released on Tuesday. The ZEW Center for European Economic Research`s confidence report due to be out at 10:00 GMT. The ZEW data may also show that investor confidence in Germany, euro area's largest economy ticked higher in February. Market consensus called for the following numbers: - Germany ZEW current situation probably rose to 44.0 from 41.2 a month ago - Germany ZEW expectations likely edged down to 61.5 from 61.7 - Eurozone ZEW expectations probably advanced Data released last week showed Eurozone economic recovery picked up speed in the final quarter of 2013, expanding  0.3 percent in the three months to December after 0.1 percent expansion a quarter ago, while annual Gross Domestic Product (GDP) rose 0.5 percent, above market expectations of a 0.4 percent rise. The expansion was led by Europe`s largest economy, Germany, which benefited from a rise in exports. Germany has led the bloc`s recovery so far with its GDP- which accounts for 30% of the euro zone total- unexpectedly accelerated to 0.4 percent in the fourth quarter. Meanwhile, earlier this month, ECB's Governing Council voted to maintain the main refinancing rate at a new record low of 0.25 percent. While President Mario Draghi promised to take needed actions if the outlook if needed. Improving economic sentiment in Europe's largest economy is a proof that Germany is getting stronger. Generally, a positive surprise about Februarys ZEW sentiment will likely strengthen the euro, as a better-than-forecasted confidence data could offer more support to the single currency to extend gains. Euro gained over dollar so far today, last trading at $1.37123 after hitting a session high at $1.37168 and falling to a session $1.36932. The pair opened at $1.37060.

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Source: Financial Markets

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