EUR/USD Remains Under Pressure as Euro-Zone Economic Activity Slumps in Q1
Euro-Zone Q1 GDP and EUR/USD Price, News and Analysis:
- Euro-Zone economic activity collapses ahead of crucial ECB meeting.
- EUR/USD to remain under pressure.
EUR/USD On Hold Ahead of ECB Meeting
A swathe of bad economic readings across the Euro-Zone will force the ECB to loosen the purse strings further at today’s central bank meeting. The first look at Q1 Euro-Zone GDP saw a larger-than expected quarter-on-quarter contraction of -3.8% compared to a forecast of -3.5% and a prior quarter of just 0.1%. While the market had priced in a sharp contraction in Q1, the second-quarters figures are likely to be substantially worse when the effects of the coronavirus-induced economic shutdown are fully revealed.
Earlier, French Q1 GDP contracted by -5.8% vs expectations of -3.5% and a prior quarters’ -0.1%, a technical recession and the largest fall since 1949, while Spanish GDP for the same time frame fell by a larger-than-forecast -5.2%, another unwanted record. Also released earlier today, data showed a sharp rise in unemployment in Germany in April to 5.8% against market expectations of 5.2% and 5.0% in March
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EUR/USD is little changed after the data and all eyes are now on the latest ECB policy meeting at 12.45 UK. President Christine Lagarde is now under increasing pressure to ramp up monetary stimulus to halt the devastating effect of COVID-19. Markets are expecting an increase in the Pandemic Emergency Purchase Program (PEPP) from its initial size of EUR750 billion and other accommodative policies, with a cheapening of the TLTRO program also mooted.
EUR/USD look likely to respect resistance between 1.0900 and 1.0907 with the 38.2% Fibonacci retracement level at 1.0965 the next likely target if the market turns positive.
EUR/USD Daily Price Chart (October 2019 – April 30, 2020)
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