Even As Periphery Languishes, Stronger Core Eurozone Growth Sends Euro Higher

Tyler Durden's picture

Following last week's ECB very dovish conference, in which Trichet was believed to have put any tightening plans in the eurozone on hold for an indefinite amount of time, today's release of very strong core Eurozone data once again brings the specter of a rate hike to the fore, sending the EURUSD notably higher, and of course, leading to a weakening in the dollar. In addition, the already well known schism between Europe's core and periphery continues, following very weak data reported in the austere PIIGS countries, offset by consensus beating growth in Germany and France. From Bloomberg: "Euro-region economic growth accelerated to the fastest pace since the second quarter of 2010, powered by forecast-topping expansion in Germany and France that offset the impact of tougher austerity measures from Ireland to Spain. Gross domestic product in the 17-member euro area rose 0.8 percent from the fourth quarter, when it increased 0.3 percent, the European Union’s statistics office in Luxembourg said in a statement today. Economists had forecast the economy to expand 0.6 percent, according to the median of 31 estimates in a Bloomberg News survey. GDP rose 2.5 percent from a year ago." All of which once again proves that there is no possibility that Germany and France will ever allow a disintegration of the euro, and will continue to bail out all their troubled neighbors as the continued pegging of Germany's red hot economy to such weaklings as Greece is the only factor that matters for the country's export-led growth.

From Bloomberg:

“I’m rather optimistic for the euro-region outlook overall, while periphery states remain a problem,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “Germany will remain the growth pillar. The second quarter will show some weakening in growth after a buoyant first quarter.”

In Germany, Europe’s largest economy, GDP rose 1.5 percent in the first quarter after increasing 0.4 percent in the previous three months. That’s helping shield the euro region from a debt crisis as peripheral countries struggle to restore growth. In Greece, the economy grew 0.8 percent, while Portugal shrank 0.7 percent.

That said, it may be time for Goldman to take profits on their EURUSD trade with a target of 1.50: it appears the likelihood of the pair returning to such lofty levels is negligible now that the world is once again reminded about Europe's structural woes:

Euro-dollar meanwhile was at $1.4264 near the Asian close, near the top of a $1.4184 to $1.4266 range.

The pair fell to a low of $1.4121 last night in the U.S. but recovered in the afternoon. It kicked off the Asian session near $1.4245 but failed to hold on to the gains, slipping through $1.4200 for a low of $1.4184 this morning.

The pair managed to temper part of the losses in mid-morning trade here, edging back up to around $1.4200 by around midday, before the German data then triggered a sharper recovery, compared with where it had ended in the U.S. overnight at $1.4246.

The data showed seasonally and calendar adjusted GDP rose 1.5% q/q. The government had expected quarterly growth of only 0.8%. The annual calendar-adjusted rise was 4.9% (+5.2% unadjusted). GDP has now exceeded the pre-crisis level at the start of 2008, the statistical office noted.

"Lingering sovereign debt worries within the Eurozone periphery economies are unlikely to go away soon and will continue to weigh down on the euro so we are unlikely to see euro-dollar returning to $1.4900 anytime soon," commented analysts at United Overseas Bank.



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vipobviously's picture

1st Bitchez

Another 40 oz physical ag yesterday

Tail Dogging The Wag's picture

Confetti Euro? it's FRIDAY THE 13TH, folks... oh, and btw

Agricultural properties in Panama, bitchez!



Re-Discovery's picture

Numbers out today are Germany's (and France, they never really fought in the big one) economic Battle of the Bulge.


uhb's picture

Diesmal funktioniert alles...

Germany, Bitchez ;)



Just kidding

Tic tock's picture

This 'growth', where is it? Industrial orders are down, China is tightening, fuel is tight, nevermind for inflation - what sectors are seeing turnover increase?

Phat Stax's picture

"No possibility?"  Isn't that Bernank-speak?

Sean7k's picture

So, with the 2.5% inflation rate, how much GDP growth was there? Especially with a bloated public sector making up such a large percentage? 

Does anyone else get tired of the statistical mayhem and monetary madness? 

The best economic ETF in the world of fiat banksters would be the BSETF. All leverage and never a margin hike. 

All is chosen's picture

I'm worried that Portugal's renewable growth could send the Euro even higher. The demand for cork here is enormous. I've just sold the cork from all my trees. This is an eco-economy guys, sustainability & all that. None of this German industrial, planet-polluting nonsense here.


Caviar Emptor's picture

How is this different than the USA? 

Core doing well (NYC, DC)

Everywhere else is in some stage of economic decline, with the usual occasional oasis of growth in the vast desert of decay(South East, South West, Midwest, Great Lakes, Rust Belt, New England, North West, West, Cali, Mountain states, )

HTZMR's picture

"the continued pegging of Germany's red hot economy to such weaklings as Greece is the only factor that matters for the country's export-led growth."

As much as i like reading this site, the idea that the Germans will keep bailing out the Greeks because their exports depend on it is nothing short of ludicrous. The predominant reason why the German government will continue to guarantee losses with their tax revenue is an understandable fear of contagion and their deep commitment to the European project that has kept the peace here on the continent since the horrors of the second world war.

Below are figures from yesterday's IMF regional report. EU4 refers to Portugal, Ireland, Greece and Spain. The data shows the share of exports from each major country in 2009. With a fraction of the 5.9 percent being Greece, Germany has no problem decoupling itself from an economy where payments on goods bought were notoriously late anyway. With imports to Greece almost certainly declining amid the harsh recesssion, the share is unlikely to have grown last year.

Even German lenders' exposure vis a vis Greece was around 34 billion as of the end of 2010, the latest data provided. (source: BIS data http://www.bis.org/statistics/provbstats.pdf#page=66) This mainly resides at Hypo Real Estate, a ward of the state now following its collapse. Germany's second largest lender Commerzbank, also propped up by state aid, has only 3 billion euros in exposure to Greece - less than it has for indebted ball bearing maker Schaeffler alone presumably.


Germany               France   United Kingdom Sweden                 Switzerland

EA4¹                                        5.9                          10.6        12.2                        3.9                          5.1

Central&Eastern Europe    8.8                           4.8           3.5                         6.0                          3.5

Asia excl. Japan                   7.0                           4.7           5.2                         6.1                          5.8


source: http://www.imf.org/external/pubs/ft/reo/2011/eur/eng/ereo0511.pdf 



anvILL's picture

The Euro is a classic "Stay irrelevant longer than you can stay solvent" thing.
The yields on bonds doubled in a year but the currency is still pretty strong.
I have shorted the Euro last year in May only to close it 2 weeks later.
I was pretty certain that the yields will get pretty high, and I sure got that right...only to gain some self satisfaction to offset my losses.

Of course, I know I am/was missing something.
But the FX markets are way too complex to understand its fundamentals.
So, I would never trade FX on fundamentals.
Only technicals, and it works fine unlike the PM markets.

AldoHux_IV's picture

Well as long as France and Germany have their economies who cares if the rest of europe falls to slavery under the euro system-- afterall what's a couple of cracked skulls courtesy of imposed austerity and flawed policy worth when compared to the all mighty and precious core economies-- yeah it's totally worth it.