Euro Price, News, and Analysis:
- Further covid-19 lockdowns will damage the region’s growth outlook.
- EUR/USD[1] struggling below 1.2000.
The German economy is set to contract sharply in Q1 2021, according to the Bundesbank, due to ongoing lockdown measures. This follows on from last week when the German Council of Economic Experts (GCEE) predicted that German Q1 GDP would be negative 2%. ‘The greatest risk to the German economy is posed by a potential third wave of infections’ according to GCEE member Volker Wieland, and this seems to be playing out as various countries around Europe reinstate or lengthen lockdown measures. Infection rates are soaring in Germany, France, Poland, and a host of other EU member states, dampening growth prospects for 2021, despite the block’s central bank providing an unprecedented amount of liquidity. The EU’s current vaccination program remains a source of frustration with low rates of vaccination across the EU leaving the single block vulnerable to further outbreaks.
Ahead this week, important data releases include Eurozone and German PMIs on Wednesday and the latest German Ifo report on Friday. There is also a 2-day European Council meeting starting on Thursday. For all market-moving economic data and events, see the DailyFX Calendar.[2]
EUR[3]/USD[4] remains stuck under 1.2000 and with various technical barriers all the up to 1.1990, it is likely to stay sub-1.2000 in the short-term. The chart shows both the 20- and 200-day simple moving averages on either side of 1.1950, while a cluster of four prior highs around 1.1990 will also weigh on the pair. A clean break and an open below 1.1836 would leave the pair vulnerable to further falls with no real identifiable levels of strong support before 1.1603.
