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Euro plunges after German GDP strikes record low

currency-newsEuro plunges after German GDP strikes record low
The currency market was characterised by a broad sell-off on Thursday, with abysmal GDP readings from the US and Germany inflicting heavy losses on their respective currencies.

Meanwhile, the pound appears to be consolidating its recent gains, with GBP/EUR flat at €1.1041 and GBP/USD stable at $1.3132. GBP/CAD is rangebound at C$1.7634, while GBP/AUD and GBP/NZD hold steady at AU$1.8216 and NZ$1.9578, respectively.

Coming up today, the focus is on the Eurozone’s Q2 GDP reading. Will a dramatic slump in growth put more pressure on the euro?

What’s been happening?

The euro fell sharply yesterday following Germany’s latest GDP estimate.

Preliminary figures for the second quarter revealed the Eurozone’s largest economy shrank 10.1% amidst the height of the coronavirus crisis, sinking below market expectations for a 9% contraction.

The publication of Germany’s consumer price index further weighed on EUR exchange rates as investors were surprised to see the country sink into a state of deflation this month.

The US dollar suffered a similar sell-off on Thursday as the US published its own GDP figures.
While these came in slightly above expectations, it still showed a record 32.9% decline in annualised growth in the second quarter.

Amidst a sharp sell-off of its peers, the pound was catapulted higher yesterday, breaking through the psychological $1.30 barrier against the US dollar in spite of lingering Brexit uncertainty.

What’s coming up?

Turning to today’s session, it is safe to assume the Eurozone’s GDP reading for the second quarter will be the main catalyst of movement.

This could see the single currency come under additional pressure this morning if growth across the bloc suffered a larger-than-expected contraction between April and June.

The pound, meanwhile, may struggle to find its own momentum today amidst a continued lack of impactful data. Also, GBP investors will remain sensitive to any potential Brexit headlines.

Closing out this week's session will be the publication of the PCE price index in the US.

This could help to buoy the US dollar if the Federal Reserve’s favoured measure of inflation shows an improvement in June.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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