Sep 29, 2022 2:30 PM +05:00
VOT Research Desk
Key Insights
EZ Consumer Confidence (Final) -28.8 versus -25 in the previous survey.
Actual EZ Economic Sentiment: 93.7 versus Revised Forecast: 97.3.The ECB faces difficulties balancing the risks of a recession with the possibility of rate increases
In September of 2022, the final Eurozone consumer confidence numbers fell by 3.8 points to -28.8. This was the lowest reading since the series began in 1985 and was consistent with preliminary estimates.
The majority of factors, including householders’ evaluations of their previous financial situation, outlook on their future financial situation, plans to make significant purchases, and expectations regarding the general economic situation, contributed to the steep decline. Given the ongoing energy concerns, even a slight improvement in industrial sentiment may not last long.
The eurozone’s outlook for the remainder of the year is still dim. This has been made worse by the geopolitical tension surrounding the alleged sabotage of Nord Stream, which has gotten worse because the eurozone is now debating its eighth package of sanctions. However, restrictions on Russian gas remain a contentious issue within the bloc, with the commission advising governments that market intervention alone is not sufficient. The eurozone would have preferred to avoid this additional tension as it prepares for an uncertain winter.
In recent months, the euro has been under increasing pressure while attempting to return to parity. The European Central Banks’ efforts to control inflation will be made even more difficult by the weaker sentiment numbers. With additional speakers later in the day, the rhetoric from ECB members this week has been, to put it mildly, hawkish.
Christine Lagarde, president of the European Central Bank, who was regarded as neutral, stated that rates will be raised at the upcoming “several meetings,” placing her squarely in the hawkish camp at this point.
The ECB policymakers Rehn and Centeno, who were regarded as neutral and dovish, were the more surprising. Centeno did not have voting rights in October. They moved closer to the hawkish camp because both came out in favor of frontloading hikes. The balance between inflation and recessionary risks, which will be amplified by declining consumer confidence and economic sentiment, is the question…
Given that consumer confidence and economic sentiment both declined, it was surprising that EURUSD saw a 15-pip rise immediately following the news.
We are trading within the 20, 50, and 100 SMAs on the first half, with the 20 SMA moving to the upside and the 50 and 100 SMAs moving to the downside. This typically indicates bullish momentum, and the 0.9850 resistance area appears appealing..
