German Q4 GDP Disappoints; Euro Takes A Dive Despite German Prospects
According to the Federal Statistic Office German economic growth slowed more than forecast to 0.4% in the fourth quarter of 2010 as severe weather conditions hampered construction and export demand slowed. Despite the weaker than expected reading the expectation is that the recovery will continue apace in 2011 with demand for German made products picking up in China and across Asia, boosting growth. The upbeat prospects for Germany is set to be confirmed later today with the German ZEW report (due at 10:00GMT) likely to show that investor confidence rose and expectations are for a strong showing of Q1 GDP growth.
The reaction in the euro was negative after having a delayed reaction to the French GDP disappointment along with the German miss. On the day the euro slipped back into negative territory after trading higher for much of the Asia session on hopes that German and Euro-Zone GDP readings would show that the recovery was gaining traction in the euro-area. However, after the French and German disappointments there is now the expectation that the Euro-Zone reading too will disappoint putting pressure back on the euro.
Over recent days the euro has been shunned as debt fears have re-entered the minds of investors and EU Finance Ministers, who are meeting now, are not expected to be able to produce any lasting strategy to solve the crisis. In the near-term bears will eye yesterday’s lows and a break below the lower-Bollinger band to confirm the extended decline before testing the 50-day SMA at 1.3385.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.