Preliminary data for the first quarter showed German economic activity tender -2.2% q / q, in line with expectations and leaving the working day adjusted annual rate at -2.3%. At the same time, Q4 figures were revised down to -0.1% q / q from 0.0% q / q initially reported, so Germany is officially already in a recession. The contraction in the second quarter was mainly driven by the impact of lockdowns, first abroad and then Germany, which weighed on both exports and domestic demand. The general contraction has been strongest since the financial crisis and second quarter data is likely to be even worse. Economic activity declined by almost 2% in the annual comparison, and although official Q1 employment data suggest a somewhat stable situation, monthly data already indicate that this is partly a delay in official statistics, with an increase of the number of monthly unemployed in April. The Bureau of Statistics warned that developments also affect data reliability, meaning that the data has a greater margin of error than usual, although a review is unlikely to change the main message economic activity has delivered thanks to Covid- 19.
Wider EU data confirmed eurozone GDP in the first quarter of -3.8% q / q, also as expected and in line with the preliminary release. The annual rate was revised marginally higher, from -3.2% to -3.2% year-on-year, although this detracts from the fact that data shows the expansion of economic contraction due to lockdowns across Europe. However, since virus measures only really came into effect in March It is already clear that Q2 numbers will look even worse And looking further, developments will depend not only on expanding stimulus measures, but also on how the global economy is dealing with the virus and whether there will be a second wave. The central scenario remains for a recovery in 2021, but the risk balance remains down.
EURUSD kept close by 1.0800, During the Asian session and softer Dollar and EU data that were in line with expectations, the pair saw a rise to 1.0820 and the resistance of the 50-hour moving average during the European session. Yesterday, the pair hit an eight-day low at 1.0775. The H4 and Daily time frames remain negatively biased.
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