Germany's economic sentiment surged to its highest level since July 2015 at the start of 2020, surpassing analyst expectations, on the back of the recently signed "phase one" trade deal between the U.S. and China, latest survey data from research institute ZEW showed.

The economic sentiment indicator rose 16 points month over month to 26.7 in January, compared with the consensus estimate of economists polled by Econoday for a reading of 15.0 in the month.

The indicator for the current economic situation in Germany increased 10.4 points to a reading of minus 9.5 in January. The recent partial trade deal between the U.S. and China "gives rise to the hope that the trade dispute's negative effects on the German economy will be less pronounced than previously thought," according to ZEW President Achim Wambach.

However, economic growth in Germany is expected to remain below average, despite an improvement in the outlook, Wambach added.

Meanwhile, the indicator for the current economic situation in the eurozone rose by 4.8 points to minus 9.9 points in January.