ZEW survey results for the April 2020 period showed a recovery in the economic conditions of Germany and the Eurozone compared to conditions last month. However, the same report also implies a signal of a prolonged economic slowdown. The insight keeps the range of EUR / USD movements in a narrow range around 1.0860s, ahead of an important meeting of European Union leaders (22 / April).

Yesterday, the ZEW Institute reported expectations of the German economy for the next six months had increased by 77.7 points from -49.5 to 28.2. The rebound was far better than market expectations which only predicted a thin recovery to -40.

However, the current economic conditions index fell 48.4 points to a record low of -91.5. ZEW survey results for the Eurozone economy express similar ambivalence. The expectation index increased 74.7 points to 25.2, but the current conditions index fell 45.4 points to a new record low of -93.9.

"Specific questions about the Coronavirus crisis included in the survey indicate that experts do not expect to see positive economic growth until the third quarter of 2020. (Meanwhile) economic output is not expected to return to pre-corona levels before 2022," said Professor Achim Wambach, president of the ZEW Institute.

Lockdown Drops GDP Data Drastically

Some analysts consider the data to be less reliable because the survey was held almost to coincide with an equity rebound (which is currently falling again). Expectations of economic recovery starting in the third or fourth quarter of this year are considered too optimistic.

The next development depends on the ability of post-lockdown economic normalization in each country which will start in different periods. Market participants will also pay attention to the possibility of a second wave of outbreaks in the regions that take these steps.

In general, the national lockdown is expected to trigger a drastic fall in GDP and unemployment data for the first and second quarters of the year. However, Germany has scheduled a gradual lockdown easing starting next Monday.

Italy will only begin to loosen lockdown gradually starting on May 4. Spain will also still impose a lockdown for the next three weeks, in line with its status as the second-largest epidemic center on the European continent.

The Euro exchange rate is facing pressure from disputes over stimulus funding that threatens further EU unity. When the news was written, the EUR / USD currency pair traded lower in the range of 1.0864. The euro also moved sideways to almost flat versus the Pound, the Japanese Yen, and the Swiss Franc, ahead of an important meeting between European Union leaders in the next few days.

The View of Corona Bonds from Pandemic Affected Countries

In an interview with the Financial Times last weekend, French President Emmanuel Macron stated that EU political unity could collapse if it failed to sustain the economies of its fragile member states and help them recover from the effects of the Coronavirus pandemic.

According to Macron, "there is no choice" except to issue "joint debt with joint guarantees" to bail out EU member states. Because of the failure of the European Union to help its member countries facing a crisis, it can be used by anti-European Union populist groups in these countries to win votes in the next general election.

The joint debt discourse, dubbed "Corona bonds", has been opposed by Germany and the Netherlands since a month ago. Germany and the Netherlands believe that if they join in guaranteeing the issuance of the bonds, then that means they are demanding their citizens cover the funding needs of other countries.

However, the countries worst affected by the pandemic, such as Spain and Italy, view the issuance of Corona bonds as the only hope of escaping the crisis. The euro had strengthened at the beginning of the Coronavirus pandemic, in connection with the liquidation of high-risk assets that pushed repatriation of funds back to the Euro Zone.