"The euro-area economic recovery lost less momentum than first estimated in October. The survey signals a mere 0.2 percent quarterly growth rate at the start of the fourth quarter, unchanged on the third quarter."
- Chris Williamson, Markit's chief economist
While analysts believe EUR/USD would consolidate for some time after last week's sharp drop, latest fundamental data from the Eurozone is likely to push the common currency even lower. On Wednesday, the European statistical office Eurostat said that industrial output, which is considered as a leading indicator of economic health in the region, fell 0.5% in September from a month ago, when production inched higher 1%. The figure is also weaker than analysts expected, who called for a 0.2% fall. On the annual basis, production in the 17-nation bloc jumped 1.1%, from a revised fall of 1.1% recorded in August. The main downside pressure came from countries like Portugal, Luxembourg, Croatia and the Czech Republic, where output dropped most. On the flip side, Ireland, Romania, Hungary and Poland registered a pickup in activity. Nevertheless, this report may have a mild impact on market, as data from Germany and France, which accounts almost 50% of the output, is released earlier.
Still, it reflects fragile recovery, and justifies ECB's latest rate cuts, as the central bank expects weaker growth and low inflation. While economists predict stronger private consumption and improved activity in all sectors of the economy, there is no room for complacency, as there are still major structural problems needed to be solved in order to achieve sustained growth.
© Dukascopy Bank SA