European session review: EUR depreciates on disappointing German data

EUR weakened against most of its major rivals in the European session on Wednesday, as a set of disappointing data out of Germany, the Eurozone’s biggest economy, raised worries about the strength of the region’s recovery.

The ZEW economic research institute reported on Tuesday that its closely-watched investor sentiment index plunged 16.5 points to 63.3 in July. This was the lowest level since January, but continued to indicate that “the overall economic situation to be extraordinarily positive in the coming six months”. Economists had expected the indicator to decrease only to 75.2.  

The report from the Federal Statistical Office (Destatis) showed an unexpected decrease in Germany's industrial production in May, as the supply bottlenecks continued to weigh on the automotive sector. According to the report, German industrial output dropped by 0.3% m/m in May, the same pace as in April. Economists had expected a 0.5% m/m gain. On a yearly basis, industrial production grew by 17.3%, decelerating from a record 27.6% increase in April, reflecting both the low base effect and the consolidation of the economic recovery from the pandemic hit.