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German GDP overview

German Gross Domestic Product (GDP) due at 08:00 GMT is expected to show the economy contracted -9.0% quarter-on-quarter in April to June (Q2) period, having shrunk by 2.2% in the first quarter.

The annualized GDP is forecasted to print at -10.9% in Q2 vs. the previous quarter’s reading of -1.9%.

How could it affect the EUR/USD?

A bigger-than-expected drop in the GDP reading won’t be a surprise and could strengthen the bearish pressures around the EUR. Although the reaction to the data could likely remain limited, in light of upturn seen in the German manufacturing sector this month. Meanwhile, the forward-looking German ZEW survey pointed to a worsening outlook for the German economy. The ZEW Economic Sentiment arrived at 59.3 in July vs. 60.0 expected.

Looking at the technical, EUR/USD extends its correction from near two-year highs of 1.1805 reached after the dovish Fed monetary policy announcement. Broad-based US dollar rebound sent the main currency pair to 1.1750, down 0.30% on the day.

On the data disappointment, the spot risks falling below the 5-DMA support at 1.1734, below which the 1.1700 level will be tested. If the data surprises positively, the bulls may fight back control, driving the rates back towards 1.1771 (daily pivot), beyond which the daily high of 1.1794 will be on the buyers’ radar.

Key Notes

Forex Today: Dollar up after the Fed, ahead of historically low US GDP, stimulus talks eyed

EUR/USD Forecast: Bullish run stalls ahead of 61.8% Fibo., focus shifts to German/US GDP

Europe points to a mixed start ahead of US GDP

About German GDP

The Gross Domestic Product released by the Statistisches Bundesamt Deutschland is a measure of the total value of all goods and services produced by Germany. The GDP is considered as a broad measure of the German economic activity and health. A high reading or a better than expected number has a positive effect on the EUR, while a falling trend is seen as negative (or bearish).