Preliminary GDP Rose in the Euro Zone During the Second Quarter

Barbara Smith By Barbara Smith, 2nd Sep 2016 | Follow this author | RSS Feed
Posted in Wikinut>Money>Forex Trading

Based on the market data, one can conclude that the worse than expected results pushed the US dollar to weaken against other currencies. While euro was strengthened by upbeat results in the euro zone, downbeat data in the US pushed the currency pair EUR/USD above 1.12 level.

Preliminary GDP Rose in the Euro Zone During the Second Quarter

Growth of GDP in the euro market was recorded during the last reporting period, as forecasted. In late July, growth in the second quarter was higher by 0.3% compared to the previous quarter. On an annual basis, the increase was 1.6%, with the industrial production posting better results. This year, Gross Domestic Product is expected to grow by 0.3% compared to the previous period. If growth in GDP exceeds forecast, this will potentially strengthen the euro against the US dollar and other currencies.
In July, Italy’s Gross Domestic Product remained unchanged after posting growth of 0.3% in the previous month, falling short of forecasted growth of 0.2% by economists. Gross domestic product of Netherlands also increased to 2.3% from 1.5% the previous month, surpassing analysts’ expectations to decline to 1.2%. Preliminary data in France showed that the number of payrolls outside the agricultural sector increased in the second quarter by 0.2% after rising 0.3% in the previous quarter, meeting experts’ expectations.
Preliminary gross domestic product in Germany exceeded economists’ forecasted growth of 0.2% by posting growth by 0.4% during the second quarter after rising 0.7% in the previous quarter. Germany’s inflation of consumer prices rose in July by 0.3% after rising 0.3% in the previous month, in line with expectations.
Meanwhile in Spain, consumer price inflation fell in July by 0.7% after rising 0.5% in the previous month, as forecasted by economists. Industrial production in the euro zone rose in July by 0.6% after falling 1.2% in the previous month, beating analysts’ expected growth of 0.5%. Preliminary data in the euro zone showed GDP growth at 0.3% in the second quarter, as forecasted, versus the previous period. Forex pair EUR/USD rose to 1.1153. At the time of the announcement, better than expected GDP of Germany pushed the euro to twenty pips, returning to the stage narrow oscillation.

Against British pound, Japan’s yen, and Swiss franc, the euro strengthened. EUR/GBP climbed to 0.8604, while EUR/JPY rose to 113.86. Likewise, EUR/CHF rose to 1.0879, as well. The single currency gained strength against the Canadian, Australian and New Zealand dollar. EUR/CAD rose to 1.4465, while EUR/AUD and EUR/NZD jumped to 1.4520 and 1.5488, respectively.
Retail sales in the United States surpassed all expectations in June, and grew by 0.7% against forecast of 0.4%. This only shows that personal consumption, except auto sales, provided the momentum for economic growth in the second half of 2016. For the month of July, economists forecasted retail sales to improve by 0.2%.
If the results show the US dollar surpassing expectations, then it should fare well against the other currencies. Producer price index in June showed the highest growth this year as a result of movement in prices of products in the energy sectors. The expected price growth in production was pegged at 0.1%.
Vise index values put inflationary pressure on the economic environment, indicating strengthening of the economy. If inflation outperforms expectations, then the US dollar is also forecasted to strengthen against other major currencies. Producer price inflation in the US fell in July by 0.4% after rising 0.5% in the previous month, falling short of economists’ predicted growth at 0.1%. Core inflation fell by 0.3%, as well, after rising 0.4% in June. Similarly, this did not meet analysts’ expected growth of 0.2%. Meanwhile, retail sales in the US remained unchanged in July after rising 0.8% the previous month. Analysts predicted a growth of 0.4%. Core retail sales also fell short of predicted growth of 0.2% by posting decline by 0.3%, after rising 0.9% in the previous month.
Worse than expected data pushed the US dollar higher in the currency pair EUR/USD. The forex pair EUR/USD recorded a peak at 1.12200 and consolidated at 1.1195. The support level for the currency pair settled at 1.12370 and 1.10910. Based on the graph below, EUR/USD rose 60 pips within 15 minutes timeframe. The US currency fell against Japan’s yen, British pound, and Swiss franc. USD/JPY and USD/CHF dropped to 101.01 and 0.9720, respectively, while GBP/USD rose to 1.2987. Likewise, USD/CAD fell to 1.2942, in contrast to AUD/USD and NZD/USD that saw an increase to 0.7717 and 0.7245, respectively.

China's capital investment fell in July to 8.1% from 9.0% in the previous month. Analysts had expected a decline to 8.8 %. Industrial production in China fell in July to 6.0 %, coming from 6.2% the prior month, more or less aligned with economists’ prediction to drop at 6.1%.
In New Zealand for the month of July, retail sales rose to 2.3% from 0.8% the previous month, beating analysts’ forecasted growth of 0.9%. Core retail sales also increased to 2.6% from 1.1% in the previous month, better than forecasts at status quo of 1.1%. NZD/USD recorded a bottom at 0.7187, and subsequently consolidated at 0.7195. Against the euro, New Zealand dollar weakened as EUR/NZD climbed to 1.5491. On the other hand, in the Australian dollar against Japan’s yen, the kiwi fell as AUD/NZD climbed to 1.0671. NZD /JPY also fell to 73.41.
US stocks was upbeat due to good business results in retail chains, and as a result of increasing prices in oil. Dow Jones jumped by 0.64%, along with S&P 500 by 0.47%. Nasdaq also increased to 0.46%. Asian stocks was generally upbeat despite of weaker Chinese data. Japanese Nikkei 225 index climbed to 0.78%, while Hang Seng index in Hong Kong rose to 0.85%. Similarly, Australia's ASX 200 jumped 0.24%.
On the other hand, the European stocks were mixed, but mostly lower. Euro Stoxx 50 rose 0.06%, while France's CAC 40 rose 0.03%. On the contrary, Germany's DAX 30 declined by 0.32%, while London's FTSE 100 fell 0.07%.


Eurozone, Forex, Gdp

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