When are the German, Eurozone Q4 GDP data and how could they affect EUR/USD?
The German/Eurozone Q4 GDP Overview
The Federal Statistics Office of Germany is set to release preliminary Q4 Gross Domestic Product (GDP) data for Germany at 09:00 GMT, and Eurostat will likely report flash Eurozone GDP figures for the same period at 10:00 GMT on Friday.
Germany’s preliminary GDP is forecast to grow 0.2% quarter-over-quarter (QoQ) in the fourth quarter, after stagnating in the prior quarter. Meanwhile, the economic growth is expected to hold steady at 0.3% Year-over-year (YoY) in Q4.
Meanwhile, seasonally adjusted flash Eurozone GDP is projected to rise 0.2% QoQ in Q4, easing from 0.3% previously, while annual growth is seen slowing to 1.2% from 1.4%.
How could the German/Eurozone Q4 GDP affect EUR/USD?
The EUR/USD pair could come under pressure if GDP data from Germany and the Eurozone meet expectations. Markets will also focus on December unemployment figures for both regions, along with Germany’s January Consumer Price Index (CPI).
European Central Bank (ECB) policymaker Martin Kocher warned that further Euro (EUR) appreciation could prompt the central bank to resume interest-rate cuts. Following his comments, markets slightly increased expectations for a summer move, with the implied probability of a July cut rising to around 25% from about 15%. The ECB meets next week and is widely expected to keep rates unchanged.
The EUR/USD pair struggles as the US Dollar (USD) rises on speculation that US President Donald Trump will nominate former Fed Governor Kevin Warsh as the next Federal Reserve chair. Trump said late Thursday he would announce his choice on Friday morning, with markets favoring Warsh, who is seen as a more hawkish option.
Technically, the EUR/USD pair is trading around 1.1920 at the time of writing. The technical analysis of the daily chart suggests an ongoing bullish bias as the pair is remaining within the ascending channel pattern. The pair could approach the initial barrier at the upper boundary of the channel around 1.2050, followed by 1.2082, the highest since June 2021. On the downside, the immediate support lies at the nine-day Exponential Moving Average (EMA) of 1.1870, followed by the lower channel boundary around 1.1840.
German economy FAQs
The German economy has a significant impact on the Euro due to its status as the largest economy within the Eurozone. Germany's economic performance, its GDP, employment, and inflation, can greatly influence the overall stability and confidence in the Euro. As Germany's economy strengthens, it can bolster the Euro's value, while the opposite is true if it weakens. Overall, the German economy plays a crucial role in shaping the Euro's strength and perception in global markets.
Germany is the largest economy in the Eurozone and therefore an influential actor in the region. During the Eurozone sovereign debt crisis in 2009-12, Germany was pivotal in setting up various stability funds to bail out debtor countries. It took a leadership role in the implementation of the 'Fiscal Compact' following the crisis – a set of more stringent rules to manage member states’ finances and punish ‘debt sinners’. Germany spearheaded a culture of ‘Financial Stability’ and the German economic model has been widely used as a blueprint for economic growth by fellow Eurozone members.
Bunds are bonds issued by the German government. Like all bonds they pay holders a regular interest payment, or coupon, followed by the full value of the loan, or principal, at maturity. Because Germany has the largest economy in the Eurozone, Bunds are used as a benchmark for other European government bonds. Long-term Bunds are viewed as a solid, risk-free investment as they are backed by the full faith and credit of the German nation. For this reason they are treated as a safe-haven by investors – gaining in value in times of crisis, whilst falling during periods of prosperity.
German Bund Yields measure the annual return an investor can expect from holding German government bonds, or Bunds. Like other bonds, Bunds pay holders interest at regular intervals, called the ‘coupon’, followed by the full value of the bond at maturity. Whilst the coupon is fixed, the Yield varies as it takes into account changes in the bond's price, and it is therefore considered a more accurate reflection of return. A decline in the bund's price raises the coupon as a percentage of the loan, resulting in a higher Yield and vice versa for a rise. This explains why Bund Yields move inversely to prices.
The Bundesbank is the central bank of Germany. It plays a key role in implementing monetary policy within Germany, and central banks in the region more broadly. Its goal is price stability, or keeping inflation low and predictable. It is responsible for ensuring the smooth operation of payment systems in Germany and participates in the oversight of financial institutions. The Bundesbank has a reputation for being conservative, prioritizing the fight against inflation over economic growth. It has been influential in the setup and policy of the European Central Bank (ECB).
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