View of the Frankfurt skyscrapers. Image source: luchschen © 123RF.com
According to the Federal Statistics Office in Germany (Destatis), the biggest economy in the European Union has surprisingly grown by 0.1 per cent during the third fiscal quarter of 2019, ending in September.
Market analysts initially expected the recent trend of economic contraction, which was initiated in Q2, to continue and for Germany’s GDP performance after seasonal adjustment to have registered a reduction by 0.1 per cent in Q3.
Germany GDP q/q. Image source: TradingEconomics.com
The German economy had previously contracted by 0.2 per cent in Q2. If the consensus forecasts were met yesterday, that would have meant that the German economy would have entered into a technical recession.
Even though the news is somewhat encouraging, given that most analysts in Europe feared that a recorded contraction in Germany for Q3 would have had a negative domino effect for the rest of the countries in the bloc, the threat from a recession is not yet gone entirely.
Claus Vistesen, Chief Euro Zone economist at Pantheon Macroeconomics, was quoted by the CNBC as saying that:
“No recession, but most definitely a very weak economy. […] In some sense, this is the ‘worst’ of both worlds for markets. Today’s data confirm that the German economy has now stalled, but the headlines are probably not dire enough to prompt an immediate and aggressive fiscal response from Berlin.”
Nevertheless, the news prompted a substantial demand for all EUR-related pairs, as the EU’s currency was markedly boosted by the arguably robust economic data in Germany.
The EURAUD registered a 0.88 per cent daily gains in Thursday, eventually closing at 1.62390, which is just below the major resistance level at 1.62450.
The pair is currently in the later stages of forming a Head and Shoulders pattern on the 1D chart.
Once the initial enthusiasm in the market gets settled down, the price is likely to bounce back from that pivotal resistance level and head downwards towards the pattern’s neckline at 1.59123.
EURAUD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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