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Euro Remains Heavy as Leading Indicators and German Data Point Towards Soft Growth Prospects

Euro Remains Heavy as Leading Indicators and German Data Point Towards Soft Growth Prospects

2018-04-09 09:50:00
Justin McQueen, Analyst

Euro News and Talking points

  • Eurozone Sentix indicates investors fear the economy is indeed cooling off
  • German trade surplus falls short of expectations after largest drop in exports since August 2015
  • Euro is little changed after the mix while the German DAX has held up a bullish gap to start the week

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Eurozone Sentix Investor Confidence for April fell to 19.6, from 24 the previous month, which missed market consensus of 20.8. Despite a good assessment on the current situation, the report noted that the global economy is indeed cooling off, which may unnerve investors over the economic outlook in the near-term particularly given the step up of trade wars between the US and China.

Expectations for the Euro-Area are negative again for the first time since July 2016 with a -1.5 reading from the series compared to 4.3 in March and 22.8 six months ago. The downward dynamic for Germany was even more pronounced, with a -7.8 reading which mirrors disappointing data in other economic corners.

Soft German Data Continues to Point Towards a Levelling Off in Economic Growth

A series of disappointing economic data points from Germany continues, with today’s trade surplus of EUR 18.4bln, missing expectations of EUR 20bln. This was largely due to the surprise 3.2% decline in exports (Exp. +0.2%), which marked the largest fall since August 2015 and a second consecutive month of export declines. Another indication that growth in Europe’s largest economy is levelling off, particularly after last week’s weak industrial production data, as such, this has kept the pressure on the Euro, given the increased downside risks to Euro-Area growth.

PRICE CHART 1: EUR/GBP 1-MINUTES TIME FRAME (INTRADAY APRIL 9, 2018)

Euro Remains Heavy as Leading Indicators and German Data Point Towards Soft Growth Prospects

Chart by IG

Euro Remains Heavy as Leading Indicators and German Data Point Towards Soft Growth Prospects

EURGBP: Data shows 54.4% of traders are net-long with the ratio of traders long to short at 1.19 to 1. In fact, traders have remained net-long since March 20 when EURGBP traded near 0.87953; price has moved 1.0% lower since then. The number of traders net-long is 1.3% lower than yesterday and 5.8% higher from last week, while the number of traders net-short is 1.2% higher than yesterday and 4.0% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURGBP prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EURGBP trading bias.

What’s your opinion on the Euro? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Justin.mcqueen@ig.com or via Twitter @jmcqueenfx

--- Written by Justin McQueen, Analyst

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

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