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France Grows, Germany Contracts, EUR/USD Unexcited

Germany, Europe’s largest economy, contracted by 0.2% in Q4 2011. This was better than -0.3% earlier expected. Also Europe’s No. 2 economy surprised by continued growth.

These preliminary figures don’t convince the markets. EUR/USD is still depressed by Greece.

The German economy grew by 1.8% in 2011. This is weaker than 2010. Germany saw improving PMIs of late, and will likely return to growth in Q1 2011, avoiding an outright recession.

It’s important to note that Germany’s contraction in Q4 cane on the back of an upwards revision in Q3 – a growth rate of 0.6%, contrary to the “final” +0.5% growth reported earlier.

France still growing

Just before the German release, France reported that it grew by 0.2% in Q4 2011 and by 1.7% in all of 2011. This growth was surprising. Early expectations stood on a contraction of 0.2%.

Purchasing managers’ indicators pointed to less economic activity. France already contracted in Q2 2011.  But at least for now, France isn’t in danger of entering an official recession, which is defined by two consecutive quarters of contraction.

The Flash GDP release for all the euro zone is at 10:00 GMT. Expectations are for a 0.3% contraction. See how to trade this event with EUR/USD.

But this didn’t cheer up the euro. The growth figure is only the preliminary, and France could still revise the figure to the downside, as it happened several times in the past. Q3 growth was revised from 0.4% to 0.3%.

We have at least one planned revision, and then an unexpected revision to the “final” one. Final reports are probably not so terminal.

EUR/USD is still trading choppily in the 1.3145 to 1.3212 range. The eurogroup meeting planned for today turned into a video conference. A physical meeting will be held only on Monday. An approval of the second Greek bailout is still awaited.

For more on the euro, see the EUR/USD forecast.

 

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.