EURUSD: Germany needs to save other Eurozone countries, otherwise its economy may suffer

By | May 15, 2020
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EURUSD: Germany needs to save other Eurozone countries, otherwise its economy may suffer

Today, all the attention in the first half of the day was focused on data on the German economy, as market participants tried to understand how much it declined in the first quarter of this year when the pandemic only partially affected activity. Despite the fact that the German economy in the 1st quarter of this year showed the most significant reduction since the global financial crisis, there is a reason for some optimism. The coronavirus and the quarantine measures introduced in mid-March did not affect the economy much, at least compared to other European countries. According to the report of the Federal Bureau of Statistics of Germany Destatis, German GDP in the 1st quarter decreased by 2.2% compared to the previous quarter, which was much better than the forecasts of economists, who expected a fall of 2.5%.

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No one denies that in the 2nd quarter there will be a larger decline in economic activity, but the easing of restrictive measures, which will take effect from May 20 this year, may slightly smooth the indicators for the 2nd quarter of this year. The revised data also noted that German GDP in the 4th quarter of 2019 declined by 0.1%, while it was previously reported that it remained unchanged.

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It is already clear that the division of the northern and southern countries is not just being carried out. The north of the EU was less significantly affected by the coronavirus pandemic than the southern part of the region, where, for example, preliminary data on the reduction of GDP in Italy in the 1st quarter showed 4.7%, and in France, the same indicator fell by 5.8%. The Spanish economy is likely to lose 5.2%.

Today’s report on Germany once again reminded traders of the split that is now brewing in the ranks of the European Central Bank, where the north refuses to save the south at its own expense. No wonder the German Bundesbank can withdraw from the European bond repurchase program in 2.5 months.

However, if you look from a different point of view, without a sharp recovery in the economies of other countries, and we are now talking about neighboring countries, the German economy will also lack the necessary momentum. The country is largely focused on exports, which will primarily suffer due to weak demand from southern countries. From this, we can conclude that if Germany does not want to continue to finance debts and inflate the budget deficit of the member countries of the Eurozone, then it will lose itself. Many experts believe that Germany has enough strength to support neighboring countries that have suffered more severe damage from the coronavirus pandemic.

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Today, the Eurozone GDP report was released, which did not make significant changes to the market, as it fully coincided with the forecasts of economists. According to data, the GDP of the Eurozone in the 1st quarter of this year decreased by 3.8% compared to the 4th quarter and by 3.2% per annum, which almost completely coincided with expectations.

The Eurozone’s foreign trade surplus continued to decline in March to 23.5 billion euros, compared to 25.6 billion euros in February. The changes were due to a sharper 8.9% drop in exports.

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As for the technical picture of the EURUSD pair, it did not change much in the first half of the day. A breakout and consolidation above the resistance of 1.0820 may increase the demand for risky assets, which will lead to an upward correction of the trading instrument to the upper border of the side channel of 1.0895. If the reports on the US economy fail to please market participants, the pressure on risky assets may return, which will lead to the breakdown of a large minimum of 1.0770 and further movement of the euro down to the area of 1.0700 and 1.0630.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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