EUR/USD Unfazed by Better Than Expected 2Q GDP, CPI Figures

2016-07-29 09:26:00 Oded Shimoni, Junior Currency Analyst

Talking Points:

-Euro-Zone’s 2Q year-on-year GDP expanded 1.6% vs 1.5% expected

-Euro-Zone’s CPI better than expected at 0.2% vs 0.1% prior

-Euro was little changed versus other majors as ECB looms large

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The Euro was little changed versus other major currencies (at the time this report was written) after today’s Euro-Zone’s GDP figures came better than expectations.

According to preliminary estimates by Eurostat, Euro-Zone’s Gross Domestic Product (GDP) grew a seasonally adjusted 0.3% in Q2'16, a slowdown from prior figure of 0.6%, but in line with expectations. The year-on-year change in GDP was 1.6%, which was above the 1.5% expected figure, but lower than the prior 1.7%.

Euro-Zone CPI data was released at the same time as well. Headline CPI showed an annual rise of 0.2% percent, above the prior and expected figure of 0.1%.

Core CPI, which excludes volatile factors such as food, energy, alcohol, and tobacco, remained unchanged at 0.9%, above the expected 0.8% figure.

Euro-Zone economic indicators have improved compared to economists’ expectations lately, which did seem to open the door for possible upside surprises today.

With that said, the market is pricing in a rate cut by the ECB by the end of the year which could potentially put pressure on the Euro. 0.2% headline inflation, and 1.6% YoY growth, while better than expected (but lower than prior) doesn’t seem to deter market expectations for ECB easing. Taking this into consideration could perhaps explain the unimpressed initial response by the currency.

Looking ahead, Advance US 2Q GDP data is on tap and we highlighted the levels to watch for the pair here.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 41.7% of traders are long the EUR/USD at the time of writing. The SSI is mainly used as a contrarian indicator, but the current range conditions are correlated with retail traders’ more successful periods (see “Traits of Successful Traders” research), implying possible weakness ahead.

You can find more info about the DailyFX SSI indicator here

EUR/USD 5-Minute Chart: July 29, 2016