Growing investors’ concerns over the deteriorating performance of the German economy have been steadily increasing over the past several months, as the manufacturing output has been continually decreasing. As the performance of this crucial industry sector continues to deteriorate, the German economy is feared to be entering into a recession, and a clear indication of that is the GDP growth data, which showed that the seasonally adjusted German gross domestic product has contracted with 0.1 per cent in the fiscal quarter ending June 2019.
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The last Manufacturing PMI data, which was released on the 24th of July 2019, delivered some more than discouraging indications to investors and it appeared as if the gloomy outlook on the German economy is here to persist. The Flash Manufacturing PMI has decreased to 43.1 points from the previous level of 45.0 points, which is also the weakest performance for the last 84 months, according to HIS Markit.
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In the last report, it was stated that:
“Growth of German business activity slowed in July as the country’s manufacturers recorded their worst monthly performance in seven years, according to the latest flash PMI® data from HIS Markit. […] Job creation meanwhile slowed to its weakest since April 2015 as firms reported an accelerated rate of reduction in backlogs and lower confidence towards future output.” [source]
Thus, the packed economic calendar, with crucial events taking place on Thursday and Friday, could increase the EURUSD’s volatility tremendously, provided that the initial expectations are met. If the current trend of deteriorating Flash PMI data is preserved on Thursday, the euro could be additionally pressured on fears of tumbling economic activity in the bloc. Moreover, the greenback could likely find extra support on Friday, when Jerome Powell is expected to delineate on the interest rate outlook of the FED.
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