Mixed German Economic Data Stokes Risk Appetite

Figures released by the Statistisches Bundesmant Deutschland have indicated that the German economy contracted by -10.1% over Q2 2020. The preliminary reading from the Eurozone’s biggest economy missed forecasts of a -9% fall, however positive unemployment figures earlier today saw the Euro continue to gain ground against all G10 currencies.

The mixed data follows the German IFO institute cutting its forecast for the country’s GDP growth in 2021 from 10% to 6.4%, even after a projected -6.7% slump over the remainder of 2020. Concerns also remain regarding the EU’s delayed €750bn rescue package that took significantly longer to agree than anticipated.

Meanwhile, German unemployment outperformed market expectations for the second month in a row – holding steady at 6.4% in July after rising slightly over June. The number of unemployed within the country remains below 3 million, a threshold that hasn’t been surpassed since 2011.

EUR/USD moved back towards the 1.18 level following the data as the US dollar sell-off continues. The Federal Reserve held interest rates along with its asset purchase program yesterday, whilst dovish comments from Chairman Jerome Powell raised further concern over the country’s ability to weather the economic fallout caused by its rising Covid-19 infection rate.