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Increased Exports Fuel German Economic Expansion in Q1

Increased Exports Fuel German Economic Expansion in Q1

Benjamin Spier, Technical Strategist

THE TAKEAWAY: German Q1 GDP expanded by 0.5%, as previously estimated -> Increased exports fueled expansion -> EURUSD trading at new lows

Despite being surrounded by a Eurozone entrenched in a debt crisis, the German economy expanded in the first quarter of 2012 because of an increase of exports. The German economy was confirmed to have expanded 0.5% during Q1, a 1.7% expansion year over year. Exports rose 1.7% during the quarter while imports stayed at the same level, according to the German Federal Statistics Office.

Private consumption and government consumption rose by 0.4% and 0.2% respectively, while construction fell by 1.3% during the quarter. Today’s release confirms the initial 0.5% GDP estimate made in the middle of May, and it is a return to growth following the previous quarter’s 0.2% economic contraction.

Germany continues to experience moderate growth as the rest of the region battles economic contraction during the current debt crisis. On May 11, the European Commission projected that Germany’s economy will grow 0.7% in 2012 and 1.7% in 2013. The Commission said other European economies will contract during this period. Export focus has shifted from Europe to Asia, as demand for imports among Germany’s neighbors has waned.

As concerns over a Greek exit from the Euro grow, the Bundesbank predicted yesterday that Germany can handle such a possibility.

Increased_Exports_Fuel_German_Economic_Expansion_in_Q1_body_eurusd.png, Increased Exports Fuel German Economic Expansion in Q1

EURUSD made a small move down and then back up following the GDP data. The pair closed below the 1.2630 4-month low and key support during yesterday’s trading, and now sits underneath support turned resistance at 1.2580.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.