A month before the German election, news regarding the German fundamentals data are still positive. Yet, GDP Growth has slightly slowed. The figure, which has been released this morning, came in at 0.6%, a inch below markets’ expectations at 0.7%. It is the 12th quarter that Germany is printing positive economic growth. The first European economy is growing at the average pace of 0.6% per quarter since 2014. Over the last three years France GDP only increased 0.5% q/q.
It is also worth noticing that annualized growth is robust with a GDP growth at 2.1% which represents the fastest pace since 2014. German fundamentals are on the solid side with unemployment rate at its lowest since 1989. Nonetheless exports are still concerning as June showed the biggest drop since 2015 - 3% - while imports fell even more. Indeed, the euro may be too strong for Germany.
On the short-term, we believe that the Eurodollar is likely to pursue its consolidation phase below 1.1800 and markets seem to start pricing in a more cautious ECB which will definitely weigh on the currency.
By Yann Quelenn