Eurozone Data Weakens

The Euro has come under selling pressure into the end of the week under the cumulative weight of a slew of bad data releases. This morning, the German trade balance came in weaker than expected at EUR 16.4 billion vs EUR 18.5 billion expected. French consumer spending added to the heavy tone for the Euro, coming in at -18.9%, worse than the -15.8% expected and marking a heavy contraction from the 3.9% reading recorded a month prior. The return of lockdowns in France and Germany has taken a visible toll on activity over the last month.

CPI Negative Again

This data comes on the back of very weak Eurozone inflation data released on Thursday. The headline CPI reading for the block came in at -0.3% last month, worse than the -0.2% expected. The reading highlights the persistent, subdued inflationary environment the ECB has been warning against and underscores the lack of prices pressures in the eurozone economy.

PMIs Underperform

Earlier in the week, French, German and Italian PMIs were all seen printing firmly in the red. The eurozone manufacturing PMI also undershot expectations at 55.2 vs 55.5 expected and prior. In all, it was a poor showing for eurozone data this week and further endorses the warnings from the ECB over the near-term risks to the economy as a result of the ongoing pandemic.

ECB Warns of Q4 Dip

In its Eurozone Economic Bulletin released this week, the ECB warned that it is expecting a further drop in growth over Q4. The bank noted: “High-frequency indicators and the latest survey results are consistent with a fall in GDP in the final quarter of 2020. Survey indicators point to a renewed contraction in activity primarily affecting the services sector.” While the bank acknowledged that the vaccination programme is a positive step, it cautioned that it will “take time” before the programme achieves widespread immunity and allows for the economy to return to normal. The bank’s message echoes concerns over how slowly the vaccines are being rolled out in the eurozone with countries such as France having vaccinated less than 1000 people so far.

Technical Views

EURUSD

EURUSD continues to trade higher within the bullish channel which has framed the recent move. However, momentum studies are flagging divergence and price is starting to correct here. While price holds above the 1.2090 support, the near-term bias remains bullish. However, a break below that level, and the channel low, will turn focus to the 1.1613 level support next.

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