The latest data on a huge decrease in the Germany ZEW economic sentiment index, which dived by over 10 points, gave economists a shock.
According to the report published by the Centre for European Economic Research (ZEW), the indicator, which measures analysts' sentiment towards the prospects of the German economic growth, dropped to the level of 1.9 points in October from 12.1 points in September. The index came out way below the forecast of economists who had expected a fall to the level of 6.8.
The current political environment in the country became the major reason behind such a dramatic slump.
A massive protest took place in the German capital against the Transatlantic Trade and Investment Partnership with the EU and US. Protesters expressed concerns that the planned free-trade deal threatens to have a harmful impact on the market as the European goods will be replaced with the US cheaper poor- quality goods.
Besides, the Germany ZEW economic sentiment index was badly hurt by the Volkswagen emission scandal.
The index, which measures the level of analysts' optimism about the current economic situation in Germany, depreciated to the level of 55.2 point in October from 67.5 points in the previous month.
However, experts still assume the economic situation to be stable. Economists do not expect the economy to fall into recession.
On the back of the decrease in the Germany ZEW economic sentiment index, the single European currency is trading downwards against its US rival, leaving a 3-week high. The latest report made traders to cut their euro positions. The EUR/USD pair rose to 1.1372 from 1.1410 ahead of the release.
Meanwhile, the European currency continues advancing against the British pound, which weakened on the back of the recent report on the UK negative inflation rate in September.