When is German GDP data and how could it affect EUR/USD?

Omkar Godbole FXStreet Contributor

Germany's preliminary gross domestic product (GDP) for the fourth quarter, scheduled for release at 07:00 GMT, is expected to show the old continent's biggest economy contracted 3.4% year-on-year, following the third quarter's 3.6% contraction.

The quarter-on-quarter figure is seen coming in at 0% versus 8.5% in the third quarter.

Coroanvirus-led contraction

Germany saw infections shoot up during autumn and into winter and responded by closing restaurants, bars, sports, and leisure facilities on Nov. 2. The lockdown restrictions remain in force to date.

As such, the economic activity may have taken a hit in the final three months of 2020. However, the contraction could be less severe than expected, as German factories churned out more goods in November and December despite lockdown restrictions.

Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, rose to 58.3 in December from 57.8 the previous month. An above-50 reading indicates expansion.

A big beat on expectations may put a bid under the single currency, helping EUR/USD hold the key support at 1.2050. That level is currently housing the daily chart head-and-shoulders neckline support. At press time, the pair is trading near 1.2096, representing a 0.20% drop on the day.

The pair will likely chart a head-and-shoulders breakdown if the European stock markets remain risk-averse, drawing stronger haven bids for the dollar. Stocks markets in the US and across the globe faced selling pressure earlier this week on fears of social-media-driven hedge fund selling, and due to concerns, the US fiscal stimulus will be smaller than hoped.

The futures tied to the S&P 500 are currently pointing to continued risk aversion with a near 0.9% drop.

Description

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).

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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