German Economic Confidence Unexpectedly Improves In June

Germany’s economic confidence unexpectedly improved in June but remained in the negative zone for the second straight month indicating that financial market experts see no improvement in the economic situation over the second half of the year, results of a closely watched survey showed Tuesday.

The ZEW Indicator of Economic Sentiment unexpectedly rose to -8.5 in June from -10.7 in May. The expected score was -13.1. Nonetheless, the index remained negative for the second straight month.

Experts’ assessment of current economic situation deteriorated sharply in June. The corresponding index plunged 21.7 points to -56.5.

ZEW President Achim Wambach said the export-oriented sectors are set to perform poorly due to a weak global economy. That said, the current recession is generally not considered as alarming.

Further, the survey showed that economic confidence in the 20-nation single currency bloc weakened slightly in June. The sentiment index dropped 0.6 points to -10.0. At the same time, the current situation index slid 14.4 points to -41.9.

Regarding monetary policy expectations, experts’ view diverged between the eurozone and the US. Indicating further increases in interest rates, the balance for short-term interest rates in the euro area came in at 72.3. By contrast, experts expect no change in short-term interest rates in the US.

The US Federal Reserve is widely expected to pause its tightening cycle at the upcoming meeting on June 13 and 14. Meanwhile, markets anticipate the European Central Bank to deliver another rate hike this Thursday.

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