Once again, several fundamental statistics on the state of the German economy (the leading flagship economy of the Eurozone) led to the formation of pressure on the European currency today in the morning. However, as the day before, after updating the lows, buyers began to gain long positions. Yesterday’s scenario and low trading volume, in a place with weak market volatility, may continue today.
Back to the report, which indicated that in April, German exports were the weakest in its history. According to the data, compared to March, exports decreased by 24.0% and amounted to 75.7 billion euros, while economists expected a reduction of 25% immediately. Not surprisingly, the coronavirus pandemic also affected imports, which also fell by 16.5% to 72.2 billion euros during the reporting period. As a result, Germany’s foreign trade surplus was only 3.2 billion euros, while economists had forecast a balance of 9.0 billion euros.
Let me remind you that the pressure on the euro was formed at the beginning of this week after a weak report on German industrial production was released. According to the data, production, taking into account all sectors from manufacturing to energy and construction, fell in Germany in April this year by 17.9% compared to March, while economists expected a reduction of 16.8%. Compared to April 2019, production decreased by 25.3%. Manufacturing output fell by 22.1% at once, but the automotive industry suffered the most, with production falling by 74.6%.
However, the data on the reduction of GDP in the Eurozone had a positive impact on the euro, as timely the measures taken to support the economy can have a positive impact on the indicators for the 2nd quarter of this year. As it became known today, according to the final report, in the 1st quarter, the Eurozone economy did not shrink as much as previously thought. The statistics agency noted that compared to the 4th quarter of last year, the GDP of the Eurozone decreased by 3.6%, and compared to the 1st quarter of 2019 – by 3.1%. Earlier, it was stated that the reduction was 3.8% and 3.2%, respectively. Everything from government spending and consumer spending to investment and exports has declined. Foreign trade, hotel business, and public catering were the most severely affected by the coronavirus. The largest decline in GDP was observed in the south of the Eurozone in France and Italy. However, we should not be optimistic about the figures for the 1st quarter, since the quarantine measures have been in effect since mid-March, and this is the last month of the 1st quarter. A clearer picture will already be presented in the report for the 2nd quarter of this year.
It is not surprising that against this background, the European Central Bank continued to increase net purchases of corporate bonds. Last week, they rose by 2.3 billion euros as part of the CSPP corporate securities acquisition program. Also, do not forget about the new 600 billion in emergency aid program approved last week.
As for the technical picture of the EURUSD pair, the entire focus on the North American session will be shifted to the resistance of 1.1315, the breakout of which may return to the market of euro buyers who are betting on the continued strengthening of risky assets and the breakout of last week’s highs in the area of 1.1380.