EURO AREA AND GERMAN GDP SENDS EU ASSETS LOWER
- German GDP stagnates, EU confirms growth slowdown
- EUR/USD pulls back on hotter US inflation data amid a weaker growth outlook, but the uptrend remains in tact
- DAX index gapped higher but has declined significantly on the pessimistic fundamental data
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GERMAN GDP STAGNATES, EU GDP REVEALS GROWTH SLOW DOWN
Q1 GDP data for Germany narrowly avoided a contraction as the first three months of the year registered a 0% improvement on Q4 of 2022, according to the flash estimate on Friday morning. The print comes in significantly lower than consensus estimates of a minor 0.3% growth, leading EU related assets decisively lower.
The wider Euro Area economy fared slightly better but also missed estimates on both the quarter on quarter (QoQ) and year on year (YoY) benchmarks. YoY growth of 1.3% represents a 0.5% decline from the Q4 statistic, continuing the growth slowdown.
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The disappointing data has resulted in rate expectations shifting further in favor of a 25 basis point (bp) hike when the ECB’s governing council meets next week Thursday, with an outside chance of a 50 bps looking less likely. Markets currently anticipate an 80% chance of a 25 basis point hike next week.
ECB Interest Rate Probabilities (Implied)
EU ASSETS HEAD LOWER AFTER DISAPPOINTING GROWTH DATA
EUR/USD immediately headed lower after the German data but consolidated in the moments after the EU data made its way across computer screens.
EUR/USD 5-Min Chart
The recent move lower has been spurred on by the weaker than expected growth data in Germany along with a rare boost for the dollar as yesterday’s inflation component of the US Q1 GDP print came in hotter than expected – adding more weight behind the general consensus we’ll see a 25 basis point hike next week from the FOMC.
The longer-term uptrend remains bullish as prices remain within the ascending channel for now. In fact, such a pullback will be welcomed by EUR/USD bulls anticipating a pullback before considering a bullish continuation.
EUR/USD Daily Chart
The DAX index also declined after the German growth data according to the 5-minute chart below despite a gap higher at the open. The index had already shown signs of bullish fatigue on the daily chart with as it struggled to push on from the yearly high.
DAX 5-Minute Chart
Source : Daily FX