"The German economy is actually in quite a good shape looking forward. That is also good news for the euro area as a whole."
- Natascha Gewaltig, director of European economics at Action Economic
The single currency received a strong bullish impetus on Tuesday that pushed EUR/USD to 1.3763. The pair is approaching a strong resistance at 1.3773, and in case it is breached 1.3712 will be put on the map.
The main reason for such a strong performance is optimistic data from Europe's largest economy, Germany, while even strongly bearish market sentiment (67%) was not able to limit pair's appreciation. The country that has been a locomotive for the whole 18-nation bloc since the creation of the union expanded 0.4% in the quarter of 2013. The reading came in line with previous estimations. On a yearly basis the economy posted a 1.3% growth, also meeting forecasts and accelerating from 1.1% three month earlier. The main contribution came from exports, with foreign sales expanding 2.6%, while equipment and construction investment each moved higher 1.4%. With business mood around the highest in 2 1/2 years and unemployment fluctuating at a record low, German economy is providing a boost to other European countries, with the bloc being German largest trading partner. Tuesday's reading can help Mario Draghi decide whether additional stimulus is required.
Still the recovery is not balanced, as the economy should move away from export domination to a stronger consumer sector and domestic demand.
© Dukascopy Bank SA