Morning Forex Fundamental: EUR

Morning Forex Fundamental: EUR

'While the decline in confidence is certainly a damper after the recent surge in optimism, the scenario of a moderate recovery gradually picking up speed in the course of the year hasn't changed' - Heinrich Bayer, an economist at Deutsche Postbank AG

Falling confidence among investors in Europe's largest economy reflects nation's vulnerability to the problems afflicting the bloc's southernmost nations. A closely-watched barometer, made by the Ifo institute, declined to 106.7 from 107.4 in February, falling for the first time in five months. Analysts, however, expected a gain to 107.8. A worsening mood among German businesses was affected by negotiations over a Cypriot bailout, which can increase tensions among Eurozone leaders. Business confidence also failed to rise in France, region's second largest and declined in the Netherlands and Belgium. Despite shrinking in the last quarter of 2012, German economy is expected to start growing already in the first three months of this year and is widely expected to avoid falling into recession.

'While the decline in confidence is certainly a damper after the recent surge in optimism, the scenario of a moderate recovery gradually picking up speed in the course of the year hasn't changed,' said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. Uncertainty around Cyprus may weigh on the outlook for companies, 'but it probably won't have any real consequences for the German economy,' he said.