German Economy Likely Expanded in Q1 2013
We are embarking on another week with a brief analysis of current rate movements in the EUR/USD pair. The Euro-dollar closed in NY Friday at $1.3052, after easing off a session high of $1.3130, with the rate being marked higher into early Wellington on Monday trade on the back of expected EUR/JPY demand (following no pressure from G20 on Japan for recent monetary policy moves).
Italian President Giorgio Napolitano was elected for a second term on Saturday following a last minute deal among party chiefs to break the deadlock after five previous ballots failed to produce a winner. With the support of all major parties except Beppe Grillo’s 5-Star Movement, Napolitano won the vote. At 87 he is already among the world's oldest heads of state, and it is widely believed that he may not serve the full seven-year term and most likely will resign after the political gridlock that has lasted since February’s election.
In other news out of the Euro Zone and on a positive note, Germany's economy firmed in the first quarter, after contracting in the 4th quarter of last year, the finance ministry said on Monday. Consumption, which is expected to drive growth this year, has not picked up significantly, opposing expectations. Europe's most powerful economy held up well during the first two years of the debt crisis in the Euro Zone, but in the past year it has tarted to feel the impact of weak demand from within the currency bloc.
"After a significant economic downturn at the end of last year, overall economic activity in Germany probably stabilised in the first quarter," the finance ministry reported. Germany will release preliminary first-quarter GDP growth data on May 15. The finance ministry said recent indicators did not imply that private consumption had picked up significantly at the start of 2013, citing an Ifo survey which observed firms accounted retail conditions to be a little worse in the first quarter than in the fourth quarter of last year.
Rate was initially marked higher into the Wellington open, the rate spiking on to $1.3117 in thin conditions before dropping back to $1.3039 before it bounced to $1.3094 before the main centre session of Asia opened. Rate eased off to $1.3054, where it met decent demand in the area between $1.3060/50, edging back to $1.3084 before drifting back to $1.3064 ahead of the European open. A fairly light data calendar through the European morning, though several speakers due up.
Little US data (US existing home sales 1400GMT) with EZ consumer confidence also due at 1400GMT. Eurozone flash PMI data Tuesday seen as the early focus this week. Bids remain in place to $1.3050 with stops noted on a break of $1.3040. Further demand $1.3010/00. Resistance seen from $1.3125 through to $1.3150.
Looking on the charts minor support lies around the pulback low set on Friday around the 1.3025-30 area, followed by the major support at the figure 1.30. On the upside the trend line from Wednesday’s Early European morning spike high and Friday’s high is currently capping around 1.31, so in the near term we expect levels between 1.3090-1.31 to be tested. Next objective is 1.3120-30 area where Friday’s highs were established.
Further rise towards 1.32 is on the cards for now as the market players expect PMI surveys from the Euro Zone tomorrow morning. Expectations for tomorrow's numbers are centered around 46.8 for Manufacturing and 46.6 for Services data. Any substantial deviations could shake the EUR/USD exchange rate briskly.