EUR/USD lower despite GDP growth in France and Germany
The third quarter growth data in Germany has surprised traders with expansion. Economists had forecast a contraction of 0.2%, but there was an expansion of 0.3%. France came in as expected.
(Video Transcript)
German economy expands
Despite talks of looming recession in the german economy, none of it, as we saw the first reading of third quarter (Q3) gross domestic product (GDP) coming through with an expansion, not the contraction that we have been looking for.
Let's take a look at the numbers as they hit the wires this morning. Third quarter figures came in at 0.3%, a positive number. We'd been looking for a contraction of 0.2%.
Now that would have been the first month of what was expected to have been two continuous quarters of this reading. Year-on-year (YoY) we came through far stronger than expected at 1.2%.
French GDP expands
Also we saw expansion in the French economy as well. Earlier on today the French readings came in pretty much in line with expectations with the expansion of 0.2% quarter-on-quarter and 1% growth year-on-year.
Now under normal circumstances when looking at the reaction to this, you would expect to see the currency within those economies rise. What happens is none of that.
EUR/USD
If you look at where we are in the EUR/USD.
As of the close of yesterday we disappeared below this blue dotted line, which is the 1-1 parity level. And that's exactly where we are at the moment. We have recently just tried to get back up above it - there was a little bit of positivity as a result of these GDP numbers, but you can see this direction of travel is down once again.
Now part of this is strength once again in the US dollar. But the moves that we saw yesterday were all about the fact that the European Central Bank (ECB) said it was going to continue to print money and that is expansionary, and that is something where we saw this euro pullback.
So the gains that we've seen up until the close of trade on Wednesday have to a degree evaporated since then and it's really all about the outlook and the worsening economy.
Once again, I think that's really driving this move in the foreign exchange markets with lower euro for a second day in a row.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
