(07 SEPTEMBER 2018)DAILY MARKET BRIEF 2:German economy likely to grow moderately in 2H2018 as foreign demand expected to
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(07 SEPTEMBER 2018)DAILY MARKET BRIEF 2:German economy likely to grow moderately in 2H2018 as foreign demand expected to

7 September 2018, 15:16
Jiming Huang
Jiming Huang
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The German economy did well in the month of August. It managed to overcome the weakness from the first half amid improved manufacturing and service activity while inflation remained below the 2% threshold thanks to more stable currency exchanges across the months of July and August. But the trend is likely to change in the coming months as foreign demand is expected to decline rapidly.

Indeed, with German industry remaining strongly dependent on its automotive sector - accounting for more than 20% of total German industry revenue - and manufacturing orders remaining in negative territories for the second consecutive term (despite stronger domestic orders) owing to looming US tariffs on the EU automotive industry, the German economy is likely to grow only moderately in the second half of 2018.

Additionally, recent current account balance data tends toward a weaker trade surplus for the country, pushing manufacturing confidence downward starting from September.

The recent EUR/USD bounce is not expected to be sustained. The pair will be heading downward, approaching the 1.1570 range as the market is waiting for the US announcement of further duties against China.

By Vincent Mivelaz

#EUR