European session review: EUR strengthens, supported by upbeat economic sentiment data from Germany

EUR rose against most of its major counterparts in the European session on Tuesday, supported by stronger-than-expected data on investors’ economic sentiment from Germany, the EU's biggest economy. 

The latest ZEW Economic Sentiment survey for Germany showed that economic confidence improved notably in December due to coronavirus vaccine hope. According to the report, the ZEW indicator of economic sentiment climbed to 55.0 in December from 39.0 in the previous month. Economists had expected a reading of 45.5. The ZEW’s President Achim Wambach suggested that the December improvement in sentiment was most likely due to the announced forthcoming Covid-19 vaccine approvals. In the meantime, the assessment of the economic situation in Germany slightly worsened this month. The ZEW current situation index fell to -66.5 from -64.3 in November. Economists had forecast the indicator to decline to -66.0.

In addition, Eurostat reported that the Eurozone's economy recorded its biggest expansion since 1995 in the third quarter, boosted by a rebound in activity and demand as Covid-19 restrictions were gradually lifted. According to the report, the Eurozone's GDP grew 12.5 percent q/q, reversing an 11.7 percent q/q contraction in the second quarter. Germany's GDP was up 8.5 percent q/q in the third quarter.