Market update: Euro latest, Germany likely contracted in Q3, PMI and ECB meeting next

Bundesbank hints that German economy likely shrunk in Q3

Germany’s Bundesbank produced a monthly report pointing towards the likelihood of another quarterly contraction, as industrial production and weakening consumption plagues Europe’s largest economy. The report comes ahead of fresh German and EU PMI data for October, which is expected to show very little progress, remaining at suppressed levels. The German manufacturing PMI data set – a sector that normally produces strong results - has led the rest of Europe lower.

Should a contraction be confirmed, it would result in fourth straight non-positive quarter. Negative GDP growth during Q4 2022 and Q1 2023 placed Germany into a technical recession, followed by a flat GDP growth in Q2.

German GDP growth (QoQ)

EUR/USD slide finds support despite a lack of clear bullish drivers

The weekly EUR/USD chart reveals four prior weeks of consolidation, after the impressive selloff that preceded it. The US dollar, despite seeing an uptick in fundamental data, is struggling to reignite prior momentum. US GDP is likely to show a stellar 4.1% expansion according to markets and recent data has shown a tendency to surprise to the upside (FNP, CPI, US retail sales).

In addition, US Treasury yields maintain elevated despite easing in recent sessions. This is in contrast with the EU where fundamental data continues to suffer. Nevertheless, EUR/USD appears to be experiencing a reprieve. The lack of clear bullish catalysts suggest that any advance may be short-lived, creating the potential for a return to range bound conditions, although, the range appears much tighter than before (1.0640 – 1.0520).

EUR/USD weekly chart

The daily EUR/USD chart shows the period of consolidation in more granular detail. Current resistance appears via the May low of 1.0635, followed by 1.0700. The pair also trades well beneath the 200 simple moving average, but the MACD indicator favors the recent bullish momentum.

EUR/USD daily chart

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