Forex: EUR/USD: France sneezes, Europe contracts a virus

on Nov 14, 2013
Updated: Oct 21, 2019
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**iNVEZZ.com, Thursday 14 November:**

The EUR/USD has so far today been under pressure from short-sellers, reaching an intraday bottom of 1.3418 in the mid-European session. However, the currency pair has been setting higher lows since the surprise ECB rate hike, indicating that the euro is still in a short-term uptrend.
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“When Paris sneezes, Europe catches a cold.” So said Prince Klemens von Metternich, Austrian Foreign Minister, in 1830. Today’s flow of economic data from the Eurozone paints a similar picture, as deteriorating conditions in France drag on the recovery of the wider Eurozone.

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The preliminary French GDP reading for the third quarter q/q fell by 0.1 percent, confounding expectations for a rise of 0.1 percent and the prior gain of 0.5. Year-on-year, the French economy expanded by 0.2 percent, marginally below the projected rise of 0.3 percent. Partially offsetting the negative numbers was an upward revision of the second quarter’s annualized growth, up from 0.4 to 0.5 percent.

On the prices front, French CPI for October y/y checked in earlier today at 0.6 percent, falling short of forecasts for 0.7 percent after September’s gain of 0.9 percent.

Preliminary German GDP for the third quarter y/y came out better than the anticipated 1.0 percent increase with an actual rise of 1.1 percent, following Q2’s 0.9 percent growth. Quarter-on-quarter though, and as had been forecast, Germany’s economy lost momentum, with the expansion slowing from 0.7 percent to just 0.3 percent in Q3.

The Flash Eurozone GDP for Q3 y/y showed a drop of 0.4 percent, well below the market consensus for a decline of 0.3 percent. Exacerbating the disappointing release was a downward revision of the prior reading, down from -0.5 to -0.6 percent.
On a more positive note, Irish Prime Minister Enda Kenny announced today that the country will exit its three-year bailout without recourse to a further line of credit from the Eurozone’s €500 billion rescue fund. Ireland will thus become the first of the Eurozone’s four bailout countries to complete its rehabilitation, with an anticipated return to the bonds market next month.

“We will exit the bailout in a strong position,” Prime Minister Kenny told the Irish parliament. “The government has been preparing for return to normal market funding for three years.” Mr Kenny said that the Irish economy was now growing and the deficit was narrowing, raising the solid prospect of sufficient market confidence in Irish sovereign debt without the need for further funding from Frankfurt.
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In the US today, the highlight will undoubtedly be the Senate confirmation hearing for Janet Yellen as new chair of the US Federal Reserve. Endorsement of Yellen’s nomination is widely expected, but her choice of words at the hearing will be carefully monitored in the financial markets, for any insights into the Fed’s future monetary policy.
Right now, the EUR/USD is trading around 1.3457, down 0.22 percent intraday.
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