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EURUSD May Sink if German GDP Data Spooks Financial Markets

US DOLLAR, GERMAN GDP, EURUSD – TALKING POINTS

  • US Dollar may rise if German GDP data spooks markets, boosts demand for liquidity
  • Europe’s largest economy may show a contraction on a quarter-on-quarter timeframe
  • Slower regional growth amid political volatility may continue to pressure local assets

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GERMAN ECONOMY FACES REGIONAL HURDLES, SLOWER GLOBAL GROWTH

EURUSD may be dealt a severe blow if the German economy – Europe’s largest – shows that it contracted on a quarter-on-quarter basis. This would proceed the recent publication of German ZEW Survey Expectations that reached alarmingly-low levels after significantly undershooting forecasts. The Eurozone is also being afflicted with political uncertainty from Brexit and Italian turbulence.

Economic data out of the Eurozone has been tending to underperform relative to economists’ estimates, though there has been improvement over the past few months. However, the outlook for regional growth remains dim against the backdrop of uncertainty posed by the US-China trade war (despite the recent cooldown). In this environment, Germany’s export-driven economy has had difficulty finding support amid global deceleration.

Furthermore, investors still have to contend with the possibility – however slim – that US President Donald Trump will impose auto tariffs against Germany. Such a move in the current global environment that may tip the global economy into a recession. As it stands, many central banks in major economies are cutting rates far more aggressively than what analysts had estimated.

CHART OF THE DAY: IS GERMAN ZEW DATA YET ANOTHER CANARY IN THE COAL MINE FOR A SEVERE DOWNTURN AHEAD?

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— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

Source: dailyfx.com