The June German Zew gauge fell to -63.9 from -52.4 the month prior and significantly below the expected -55.0. The reading was the lowest in more than 16 years as rising inflation and interest rates weighed on investors confidence. Inflation at a 16 year high prompted the ECB to raise rates at its last policy meeting which will further squeeze purchasing power as credit costs continue to rise. Furthermore, a strong Euro has weighed on exports and with rising input costs companies are seeing their margins continue to shrink. The recent reemergence of financial concerns on the back of the Fannie Mae and Freddie Mac and its negative effect on stock markets have added to concerns. The evidence continues to build that the European economy is slowing with industrial production falling 1.9% in May, which may limit the central bank’s ability to raise rates further as they adhere to their mandate for price stability. – John Rivera, Currency Analyst