The eurodollar (EURUSD) has been struggling recently due to the ECB’s dovish rate hike outlook. Additionally, fear of a domino-effect from the ongoing crisis with the Turkish lira has given traders another chance to add up to their short positions. However, initiatives taken by the Turkish Central Bank have temporarily calmed the market, and three crucial economic data reports were released yesterday for the euro that proved positive.
German preliminary GDP
Germany’s economic growth surpassed expectations in the 2Q18 (April-June), data reported by Destatis (Federal Statistics Office) revealed. Gross domestic product (GDP) grew 0.5% sequentially, following the upwardly revised 0.4% rise in the first quarter. Economists had expected a growth rate of 0.4%.
The government forecast an economic growth rate of 2.3% this year and 2.1% for next. This would be much higher than Germany’s average growth rate for the past 10 years.
On an annualized basis, seasonally adjusted data revealed that the German economy registered a growth rate of 2.0% between April and June. The Thomson Reuters consensus estimate for growth rate stood at 2.1%.
Eurozone Flash GDP
The data published by Eurostat revealed that the Eurozone economy expanded at a faster pace than previously estimated in the second quarter. GDP increased 0.4% on q-o-q basis, beating analysts’ expectation of 0.3% growth. In the previous quarter, the economy expanded by an upwardly revised 0.4%.
On yearly basis, GDP growth softened to 2.2%, from 2.5% in the earlier quarter. The second-quarter growth rate was upwardly revised from 2.1%.
German ZEW economic sentiment
The Mannheim-based ZEW research institute reported an improvement in Germany’s economic confidence in August. According to the institute, the index climbed to -13.7 in August, from -24.7 in July. Analysts had expected a reading of -20.1.
Likewise, the index representing investors’ assessment of the economic scenario increased to 72.6, from 72.4 in the previous month. The Consensus forecast expected a decline to 72.3.
Commenting on the economic sentiment index, ZEW President Achim Wambach said, “the recent agreement in the trade dispute between the EU and the United States has led to a considerable rise in expectations for Germany and also, to a lesser degree, for the Eurozone.”
Impact on EUR/USD
As shown below, the EURUSD pair is still in a downtrend, despite the good economic data reported yesterday. However, US retail sales data – to be released later today – may trigger a reversal in the EURUSD pair.
In June, retail sales increased 0.4% on a m-o-m basis. However, analysts expect a fall in the retail sales growth to 0.3%. If the retails sales data meets or misses analysts’ forecasts, then we may see a bullish reversal in the EURUSD pair.
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