EUR/USD has posted slight losses on Thursday session, wiping out the gains seen on Wednesday. In the European session, the pair is trading at 1.1299, down 0.10% on the day. On the release front, the sole indicator is eurozone trade balance. The surplus dropped sharply to EUR 13.4 billion in September, down from EUR 16.6 billion in August. The weak reading was a result of a weakness in exports, which fell 1.0% in September, on an annualized basis. It’s a busy day in the United States. The markets are expecting good news from consumer spending. Retail sales and core retail sales are both expected to improve sharply, with estimates of 0.5% and 0.6%, respectively. The Philly Fed Manufacturing Index is expected to dip to 20.1 points, while unemployment claims are forecast to remain almost unchanged, at 213 thousand. On Friday, the eurozone releases key CPI reports.
If investors needed a wake-up call that the German economy is in trouble, then a contraction in GDP should have done the trick. A dismal GDP release greeted the markets on Wednesday, as the German economy contracted in the third quarter for the first time since Q1 of 2015. German officials tried to put a brave spin on the numbers. Economic Minister Peter Altmaier said that a 0.2% decline “isn’t a catastrophe” and that the economy would rebound in the fourth quarter. The ministry blamed the contraction on weakness in the auto sector due to new pollution standards. However, it’s likely that the skid is also due to the global trade war, which has also resulted in U.S. tariffs on European products. Investor confidence remains very low, and that could be a harbinger of more trouble ahead in the fourth quarer. On Tuesday, the well-respected ZEW research institute said that investors did not expect a rapid recovery from the current weakness. German ZEW Economic Sentiment posted a second straight soft release for November, with a reading of -24.1 points. This points to deep pessimism on the part of institutional investors and analysts.
