A Drop in German Exports Casts Doubt on Recovery
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GBP/USD – U.K. industrial production unexpectedly fell by 0.4% in January against forecasts of 0.3%. It was the first decline in output in five months led by a 0.9% decline in manufacturing. Mining and oil production saw positive gains of 1.4% and 1.1% respectively during the month rebounding from sharp falls in December of 4.8% and 5.7%. Apparel manufacturing slumped by 5.5% as weak consumer spending continues to be a weighing factor. Stimulus efforts from the government and BoE have started to loosen credit markets and fuel domestic demand. Policy maker Adam Posen said in an interview on Sky News yesterday that “We believe growth will pick up from here,” which could be a sign that the central bank is nearing an end to their QE efforts. To discuss this and other topics, please visit the GBP/USD forum.
EUR/USD– The German trade balance surplus unexpectedly shrank in January from 13.4 billion to 8.0 billion as falling exports offset rising imports. Demand from abroad dropped by 6.3% against forecasts for a 0.5% improvement led by weakness from other Euro-zone members. The surge in domestic demand of 6.0% for foreign goods is a positive sign but shrinking exports will continue to out pressure ion an already weak labor market. Meanwhile, French industrial production rose 1.6% in January surpassing estimates for a 0.1% improvement. However, strength in the region’s largest economies may be fleeting if neighboring nations continue to struggle. Therefore, expect the ECB to remain on hold until at least the second half of 2010 and probably into 2011. To discuss this and other topics, please visit the EUR/USD forum.
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