"The fundamentals of the German economy remain strong. In our view, there are sufficient arguments in favor of an acceleration of economic growth rather than in favor of a drop in soft indicators."
- Ratings agency Moody's
Investors, politicians, analysts and consumers across Europe are anchoring their hopes on Germany– Europe's powerhouse. The resilience of German economy was one of the main factors that helped to pull out the 18-nation bloc from its deepest recession ever. Therefore, market's attention was attracted to a report from the ZEW Center for European Economic Research.
A survey showed German investor mood unexpectedly deteriorated in January, raising concerns about the stability of European economic recovery. A gauge of investor and analyst expectations, which was designed to predict economic performance over the next six months, slid to 61.7 this month, easing back from a seven-year high of 62 a month earlier. A measure of current conditions stood at 41.2 in the reported month, climbing from December's 32.4 reading and beating analysts' expectations of just 35 points.
While market's reaction was modest, with EUR/USD losing just couple of pips, and analysts still believe German economy is doing well, the latest fundamental reports are sending alarming signs. Europe's largest economy posted a surprising budget deficit over the last year, while nation's GDP advanced only 0.4% in 2013, down from a 0.7% growth a year earlier.
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