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EuroZone Trade Data Turns Grim

Last updated 3/10/2009 4:54 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Trade data from both Germany and France  printed worse than expected suggesting that Eurozone economic output figures will likely prove to be weaker than the current government estimates.  German Trade Balance recorded a 8.3 Billion euro surplus less than the 10.0 Billion number  that the market was expecting while French   data showed a deficit of  -4.5 Billion  against forecasts  of -3.0 Billion.

Exports in Germany continued to fall dropping another -4.4% versus -4% expected  while in France Industrial production figures contracted at -3.1% versus -0.7% eyed.  Overall, the trade and industrial production news shows further deterioration in EZ economic conditions as collapse in global demand  continues to take its toll on the export driven region.

The currency markets ignored today’s data with EUR/USD rising to 1.2700 on risk appetite flows and some short covering as equity markets in Europe  rallied on the open.  The pair has been tracing out  a 1.2800 -1.2500 range over the past several days as both US and  EZ economic news remained dour keeping the two currencies in a Mexican standoff. Nevertheless, tonight’s economic data suggests that  the rapid decline in European trade activity will likely drag GDP numbers lower than current official estimates.

Presently ECB forecasts call for contraction rate of -2.5% for the region, but many private analysts believe that  GDP will decline by as much as -5% in Q1 of 2009. Given the disappointing trade data, the private forecasters appear to be more accurate and suggests that the unemployment level likely to rise putting more pressure on EZ officials to increase both monetary and  fiscal stimulus. Thus while the euro may rebound  on short covering dynamics in the near term, the long term economic outlook remains grim and the unit  is likely to retest the 1.2500 level  as more economic data hits the screen in upcoming days.    

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.