EUR/USD jumps higher in the aftermath of Eurozone/US data
EUR/USD rises strongly on Euro's (EUR) upbeat performance after the release of the better-than-expected Eurozone flash Q3 GDP data. The report showed that the shared continent expanded at a faster-than-expected pace in the third quarter of the year. The Eurozone economy grew by 0.4%, faster than estimates and the former release of 0.2%. Compared to the same quarter of the previous year, the economy expanded 0.9% against 0.6% growth in the April-June period. Economists expected the shared continent to have grown by 0.8%.
Higher growth in the Eurozone economy came from a surprise German economic expansion, its largest nation. The German economy unexpectedly rose in the third quarter by 0.2% after contracting in the April-June period. The French economy grew by 0.4%, as expected, while the Italian growth was flat.
Meanwhile, the October preliminary Harmonized Index of Consumer Prices (HICP) data of Germany has come in hotter-than-expected. Annual HICP accelerated at a faster pace to 2.4% from the estimates of 2.1% and the prior release of 1.8%. Surprisingly positive Q3 Eurozone GDP and hot German inflation data have dampened expectations of the European Central Bank's (ECB) larger-than-usual interest rate cut of 50 basis points (bps) in December. According to market expectations, the probability of the ECB reducing interest rates by 50 bps eases to 22% from 45% after the German data release.
Recent commentaries from policymakers have indicated that they are worried about inflation remaining persistently lower due to weakening economic growth. Meanwhile, the uncertainty over the Eurozone economic outlook continues to persist ahead of the US presidential election on November 5. While national polls have indicated tight competition between former US President Donald Trump and current Vice President Kamala Harris, traders seem to be pricing in a Trump victory, which would have deep repercussions also for the Eurozone.
Trump has promised a universal 10% tariff on all imports, except those from China, which would face even bigger tariffs. The threat of tariffs could impact the Eurozone’s powerful export sector significantly. Investment banking firm Goldman Sachs projects a 1% drop in the Eurozone’s GDP if a universal 10% tariff is imposed.
Source : Fxstreet
