GERMAN UNEMPLOYMENT RATE DROPS AS CANADA’S ECONOMIC GROWTH DISAPPOINTS
The euro was unmoved against the major currencies after data from Germany showed significant improvements. The data released today showed that the unemployment rate in the country inched lower to 5.3% in line with the forecasts. It was lower than last month’s 5.4%. The number of unemployed Germans lessened by 19K which was better than the forecasted 15K. 2.37M Germans are now unemployed compared with last month’s 2.39M.
The dollar eased a bit following yesterday’s economic data. Yesterday, government data showed that the economy grew by 2.9%, higher than the 2.5% number reported previously. The improvement in GDP was as a result of increased consumer spending and increased spending by companies on inventories. There are expectations that the economy might sustain the 3% target preferred by the president following the massive budget passed last week and the impacts of the tax cuts.
In the United Kingdom, the economy grew by 0.4% in the last three months of last year. The annualized rate was 1.4%. The data released today was in line with what analysts were expecting. In addition, business investment in Q4 increased by 0.4% while mortgage lending increased substantially. Nonetheless, the economy continues to face the challenge of uncertainty over Brexit which has led to a decline in real estate prices and the number of cars produced.
In Canada, data from the government showed that the economy slowed by negative 0.1% in January. This was lower than analysts had expected. On an annualized basis, the economy grew by negative 0.3% down from the expected growth rate of 3.3% and the expected 2.9%.
The EUR/USD pair was little moved today. From yesterday, the pair managed to wipe out the gains it had achieved in the past few days when the pair reached a high of 1.2476. At today’s prices, the pair is trying to consolidate before a major move happens. This is evidenced by the RSI, which is currently at 48 and the intersection of the short and longer term moving averages as shown below.
The Canadian dollar fell after data showed that the economic growth was decelerating. Shortly after the data was released, the USD/CAD pair rose to a multi-weekly high of 1.2739. This is a continuation of the CAD weakness this year. It has lost almost three percent against the dollar and the losses could continue as the NAFTA negotiations advance.
Using the daily chart, you can see that the cable has been on an upward trend this year. Today, the pound dropped slightly after a report showed a challenging auto and real estate market. This short-down trend might not last as shown in the chart below. The longer-term MA has crossed the shorter-term MA and the Parabolic SAR is pointed higher. Therefore, the pair could shift and move upwards and possibly test the high of 1.4353.