German GDP Reinforce Need For ECB Rate Cut as Trade Conditions Falter

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EURUSD – Economic activity in Germany fell the most since 1987 as the final GDP reading showed that the economy shrank 2.1% during the fourth quarter, weighed by a 7.3% decline in exports. The report showed that private consumption drop 0.1% during the 4Q, which was followed by a 0.3% increase in the previous quarter, while government spending held steady after a revised reading of 0.3% in the third quarter. Fading demands from the global economy pushed companies to scale back production and employment, which led to a 4.9% drop in investments, and the data continues to reinforce a dour outlook for the Europe’s largest economy as the government expects the economy to contract 2.25% in 2009, which would be the lowest level of growth since World War II. Discuss the topic and your trade ideas in the EUR/USD Forum.

GBPUSD – Economic activity in the U.K. contracted the most since 1980 as the preliminary GDP reading showed that the economy contracted 1.5% in the fourth quarter, which lowered the annual rate of growth to -1.9% from an advance reading of -1.8%. The breakdown of the report showed that exports fell 5.5%, after increase 0.5% in the previous quarter, while import slumped 5.9% during the quarter. In addition, the growth reading showed that private consumption fell 0.7% during the last three-months of 2008 to mark its biggest contraction since 1992. Meanwhile, a separate report showed that service-based activity fell another 0.9% in the three-months to December after posting a 0.5% decline in the previous month. Weakening demands from home and abroad paired with the downturn in the global financial market has certainly take a toll on the real economy, and as the outlook for future growth remains bleak, policy makers may adopt additional stimulus measures to steer the economy out of a deepening recession. Discuss the topic and your trade ideas in the GBP/USD Forum.