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Eurozone investor confidence lows mean policymakers need to act now
Eurozone investor confidence lows mean policymakers need to act now
Sentix's Euro-region investor confidence index fell to -38.3 by October, down from -31.8 a month earlier and the expected -34.9. In its history since 2003, the indicator has briefly dipped below 40 during the peak of the 2008 and 2020 market crises. Such pessimistic investor sentiment was a harbinger of increased political efforts to prop up the economy. The same can be said of the 2012 episode when Draghi pledged to do "whatever it takes to save the euro" when the Greek debt crisis dragged the indicator into the -30 area.
On the other hand, government stimulus policies now have to counter the work of central banks to contain inflation, whereas in the three cases in question, they were working on the same side.
Europe is thus approaching a point at which policymakers can switch to full throttle on supporting the economy. The need to fight inflation and the exogenous nature of the crisis, risking leaving Europe without as strong a response to the crisis as it was in 2020. In the second case, the Sentix index will continue its plunge, which promises to be bad news for the euro and has fallen below $0.9700 today.
By the FxPro Analyst Team
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