Euro Hangs On After Tough Week As German 4Q GDP Growth Stalls
Euro, German Gross Domestic Product Data, Talking Points:
- German growth came in weak, as expected
- The quarterly gain was a little better, the annualized a little worse
- EUR/USD has already been hit this week and wasn’t punished further
The Euro didn’t react much at all Friday to news that German economic growth stagnated into the end of 2019 as that had been very much the markets’ expectation before the fact.
Preliminary Official Gross Domestic Product numbers for the year’s final quarter were flat compared to the previous three months for an annualized gain of just 0.3%, non-seasonally-adjusted. The quarterly rise was a tick lower than the economists had expected, the annualized gain a tick higher.
That 0.3% rise is the weakest seen since the second quarter of 2019, which it matches, but that simply makes it the joint-feeblest print since 2013.
The eurozone has been wrestling with weaker economic numbers for some time, notably from its German engine room. The Euro has already been hit this week by the general withdrawal from riskier, growth-correlated assets which accompanied the latest surge in Chinese coronavirus cases and the bears didn’t feel the need to take another bit out of it on the growth numbers.
The Euro is far from the only asset whose followers will be keeping a close eye on the coronavirus story, but eurozone bulls had been hopeful that the old year might have been the low water mark for growth, which might then go on to pick up thanks to loose monetary policy.
The extent to which the virus’ economic impact may threaten that thesis will be a major trading factor in the weeks and months to come.
The single currency was already down to lows not seen since the first half of 2017 against the US Dollar. The Japanese Yen, the Swiss Franc and the greenback have fulfilled their customary haven roles at the euro’s expense for much of this year.
However, the EUR/USD weakness seen so far in 2020 is merely an acceleration of the trend seen since early 2018. Widespread political turmoil, Brexit, global trade troubles and lacklustre economic performance in the eurozone have taken a heavy toll on the currency’s allure.
The downtrend looks extremely well entrenched and likely to continue its dominance, even if coronavirus turns out to be less of an economic drag than the gloomiest prognoses suggest.
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--- Written by David Cottle, DailyFX Research
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