The May Economic Sentiment Index for the Euro zone fell more than expected indicating that confidence in the business sectors has declined. There are concerns that this is a sign that economic recovery in the 17-member Euro-area was losing momentum after a strong first quarter.
The European Commission released the data which gave a reading of 105.5 in May, which was a bigger drop than the expected decline of the Reuters Economists Poll of 105.7, and also down from April’s revised 106.1
A breakdown of the data showed that business confidence fell in industry services, the retail sector and in construction, but improved for the first time since February among households from 11.6 to -9.8.
Meanwhile, inflation expectations among consumers also fell to 27.4 in May from 30.7 in April, which is most likely to be a reaction to the European Central Bank’s interest rate rise in April and consequently borrowing costs would rise even more in the future.
After release of the news at 0900GMT EURUSD moved down slightly about 10 pips to 1.4197 and is currently at 1.4182 at 1130GMT. The pair was due for a pullback is currently going through a corrective rally after reaching its week high this morning at 1.4277.