German and European growth data will set the tone for the EURUSD this trading week.
EURUSD – Daily Chart
EURUSD has edged lower, as predicted last week, and now aims for further support around the 1.0722 price level. A weaker growth figure for Europe would be a significant catalyst.
German GDP growth is released at 5pm HKT and is expected to increase from -0.2% to -0.4 %. Europe’s largest economy continues to struggle in negative territory, and a weaker number could hurt the euro.
Italian GDP was released simultaneously with an expected increase. However, traders will likely wait for the European number at 6pm HKT before moving. The region’s economy is likely to stagnate at 0% year-on-year in the latest figure, and again, any further weakness could push for the support levels. A stronger number would be a risk for the short play.
Early data showed business morale unexpectedly slipped in Germany for a second month. The Ifo Institute said its business climate index dropped to 85.2 from 86.3 in December. Analysts polled by Reuters had expected the indicator to improve in January to 86.7.
“The German economy is stuck in recession,” said Ifo president Clemens Fuest.
“The tentative revival of optimism last autumn has turned out to be very short-lived,” added ING economist Carsten Brzeski, who predicted another shallow recession of -0.3% this year, matching last year’s drop.
Last year, Germany’s economy was hurt by high inflation, high energy prices, and weaker foreign demand. Government finances were stretched, and the trade issues in the Red Sea were another headwind for the exporting country.
