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Euro Falls on Disappointing German GDP Decline

Euro Falls on Disappointing German GDP Decline

Benjamin Spier, Technical Strategist

THE TAKEAWAY: German GDP declines 0.6% in Q4, more than expected -> ECB’s Draghi predicted weakness in Q4 -> Euro falls against US Dollar

The German economy contracted for only the second time in nearly three years in the fourth quarter of 2012. The German GDP declined 0.6% in Q4 (seasonally adjusted), slightly worse than the expected 0.5% decline and a reversal from Q3’s 0.2% rise in GDP. The gross domestic product rose 0.1% from Q4 2011 (non-seasonally adjusted) according to the initial estimate by the Federal Statistical Office.

The German economy expanded 0.7% over the whole of 2012. The drop-off in the fourth quarter was primarily due to a weaker German foreign trade; exports of goods declined a lot more than imports. Household and government consumption was up slightly over the quarter. German employment was 0.8% higher than Q4 2011. The final estimate of the GDP will be released on February 22.

The French GDP declined 0.3% in Q4 according to today’s initial estimate, slightly worse than the expected 0.2% economic contraction and better than Q3’s 0.1% rise in GDP.

The Euro-zone’s biggest economy has suffered from the Euro-debt crisis, as was highlighted by the decline in foreign trade. The Euro-zone GDP for Q4 will be released later today, and ECB President Draghi said earlier this month that further weakness might be seen in Q4 of 2012 and the beginning of 2013. However, the ECB expects a recovery later in 2013. Signs of economic growth in the Euro-zone or Germany would be Euro-positive.

The Euro began to decline against the US Dollar in Forex markets ahead of the German GDP release, and EUR/USD continued to fall below 1.3400 following the disappointing print. The pair may now see support at 1.3374, by the 50% retracement of the rally from January 10 to February’s high. Resistance might be seen by the 38.2% retracement at 1.3454.

EURUSD Daily: February 14, 2013

Euro_Falls_on_Dissapointing_German_GDP_Decline_body_eurusd_daily_chart.png, Euro Falls on Disappointing German GDP Decline

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

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

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