Euro Trade as Monthly Low Following Soft German IP

EUR/USD traded to a new low for the month at 1.0731 despite news that Greece met IMF debt tranche repayment deadline. The dollar has remained firm in the wake of the FOMC minutes, which although showing mixed views among members provided markets a reminder that the Fed remains on track to an eventual tightening. Resistance is seen near the 10-day moving average at 1.0835, while support is seen near the recent low at 1.0730.

The EU in serious talks with Greek authorities, progress is being made and that the objective is for Greece’s full list of reform measures to be agreed by the end of April. However, so far Greek officials still seem to be focusing on threats rather than reforms to get further funds, and the risk of exit is rising with every day that negotiations drag on.

Economic data in Europe has been mixed despite the robust QE. German February Industrial Production rose 0.2% month over month, slightly higher than the consensus and not a surprise after yesterday’s weak orders figure. January data were revised down to show a drop of 0.4% month over month, after data showed a modest rise initially. The annual rate fell to -0.3% in February from 0.0% year over year in the previous month.

The soft numbers will cast a shadow over the Q1 GDP figure, although strong confidence data and the fact that a robust labor market coupled with an increase in real disposable income are bolstering consumption growth, should mitigate the impact somewhat. Also, the breakdown shows that the overall production number was mainly held back by a 3.1% month over month contraction in construction, while manufacturing output rose 0.5% month over month. So the German recovery remains on track, even if today’s data highlights that downside risks remain.

Germany posted trade surplus of EUR 19.6 billion in February, unchanged from the previous month. Exports rose 1.5% month over month, after falling 2.1% month over month in January, while nominal imports rose 1.8% month over month, with the latter likely impacted by a weaker EUR and stabilizing oil prices, which already pushed up inflation that month. The unadjusted trade surplus amounted to EUR 19.2 billion, up from EUR 16.2 billion in February last year, while the current account surplus widened to EUR 16.6 billion in February from EUR 13.3 billion in February 2014.

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