Euro growth diverges further

Source: Dukascopy Bank SA
"First-quarter growth in the euro area was decent, but some leading indicators already suggest that the second quarter might be weaker again"
-Martin van Vliet, senior economist at ING Groep NV


Not really convincing. At all. Investors were not expecting a strong rebound in EUR/USD even in case of the upbeat data. This is a result of Mario Draghi's dovish comments and a pledge to act in June. Therefore, only significantly stronger-than-expected figures could have provided a pullback in the most traded currency pair. In reality, the common currency neared a three-month low against the buck on Thursday, losing more than 0.30% of its value with the pair changing hands around 1.3671.

The headline inflation measure in the 18-nation bloc advanced 0.7% on a yearly basis in April, accelerating from the final record-low 0.5% a month earlier. Analysts, however, expected a reading of 0.8%. On a monthly basis inflation inched lower to 0.2%, almost stumbling around the zero mark.

Divergence between Europe's core countries continued to rise in the first quarter, as Germany proved its resilience once again, while France and Italy disappointed. The overall GDP for the whole bloc climbed 0.8% in the first quarter, from 0.4% three month earlier, beating analysts' expectations for a 0.7% expansion. Growth in Germany was mostly led by stronger domestic consumption, while investment picked up as well. The latest reports, however, are pointing at a significant deceleration in the second quarter, adding more pressure on the ECB.
© Dukascopy Bank SA

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