Euro Remains Weak Despite Strong German Trade Surplus Data

Euro Remains Weak Despite Strong German Trade Surplus Data
July 9, 2019


The euro-dollar continues to remain bearish against the greenback, despite Germany – the economic powerhouse of the Eurozone – posting an impressive trade surplus and small industrial production growth. From a high of 1.1315, the EUR/USD pair declined to a low of 1.1207 in the past 24 hours.

Germany’s statistical organization Destatis reported a recovery in industrial production and exports in May. The imports, however, continued to decline. Industrial output rose 0.3% m-o-m in May, meeting analysts’ expectations, rebounding from a 2% decline in April. On an annual basis, industrial production declined 3.7% in May, wider than the 2.3% fall reported in the earlier month. Economists had anticipated the output to decrease by 3.2%.

Excluding energy and construction, industrial production grew 0.9% in May. Another report published by Destatis indicated that exports grew 1.1% m-o-m in May, versus analysts’ expectations of 0.8% growth. In April, exports declined by 3.4%.

In the meantime, imports fell by 0.5% m-o-m in May, following a 0.9% decline in April. Economists had anticipated a 0.4% rise in imports. Due to the facts mentioned above, trade surplus grew to a seasonally adjusted €18.7 billion in May, from €16.90 billion in the earlier month.

On an annual basis, exports grew 4.5% in May, compared with a 0.2% decline in the prior month. Likewise, imports grew 4.9% in May, from 2.5% in the earlier month.

On an unadjusted basis, the trade surplus increased to €20.60 billion in May from €17.90 billion in the earlier month. The current account surplus was €16.50 billion in May, compared with €13 billion in the year-ago period.

Economists, however, pointed out that that the seeming recovery in production, as indicated by the latest data, does not confirm a reversal in German industry.

Notably, the economy ministry opined that industrial growth would remain unimpressive in the forthcoming months due to the overall uncertainty in the global economy. Data published last week indicated that factory orders fell 2.2% in May, mainly due to a sharp decline in export orders. According to Ralph Solveen, deputy head of economic research at Commerzbank, the German economy is only anticipated to grow slightly in the third quarter, following a possible contraction in the second quarter.

Andrew Kenningham, Capital Economics’ economist, has stated that slowdown in German GDP growth is mainly because of contraction in industrial production in the second quarter. He also pointed out that business surveys do not depict a good picture for June. Notably, last month, Bundesbank stated that the largest economy of the euro region is likely to contract slightly in the second quarter as temporary factors that fueled first-quarter growth has withered away. The argument was justified by the worst manufacturing PMI (purchasing managers’ index) data among the EU member countries. For the sixth month in a row, the manufacturing industry contracted, with the automobile industry leading the slowdown.

The increase in trade surplus and weak outlook by the economy ministry is expected to keep the EUR/USD pair range bound in the short-term.

Technically, the EUR/USD pair remains range bound between 1.1140 and 1.1315. The currency pair is currently declining after failing to cross the resistance level. Additionally, the EUR/USD pair is trading below its 50-day moving average. The oscillator of moving average also has a negative reading. As a result, we can expect the EUR/USD to remain bearish in the short-term.

EUR - technical analysis - 9th July 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.



Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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