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15 May 2013
Forex Flash: The real economic news today comes from Europe - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts note that German, French and Italian GDP reports were weaker than the consensus.
They see that Germany managed to eke out a 0.1% expansion, though the market had been looking for a 0.3% expansion. Q4 contraction was revised to 0.7% rather than 0.6%. France contracted by 0.2% rather than 0.1% and Q4 GDP was revised to -0.2% from -0.3%. Italy contracted by 0.5%. The consensus was for a 0.3% contraction. They note that the Italian economy has contracted now for seven consecutive quarters and the eighth one appears to be under way. France reported much lower than expected inflation of 0.8% y/y in April, and mirrors the trends seen in Germany and the wider euro zone. The mix of slower growth and further disinflation (moving towards outright deflation) will surely fan expectations of further ECB actions, which Draghi has pledged it stands ready to do. They finish by writing, “We believe the ECB has entered string-pushing territory, but at the very least, market reaction (selling the euro) should help the euro zone economy at the margin, perhaps more than another symbolic cut in the refi rate would. A weaker euro is needed now, not a stronger euro.”
They see that Germany managed to eke out a 0.1% expansion, though the market had been looking for a 0.3% expansion. Q4 contraction was revised to 0.7% rather than 0.6%. France contracted by 0.2% rather than 0.1% and Q4 GDP was revised to -0.2% from -0.3%. Italy contracted by 0.5%. The consensus was for a 0.3% contraction. They note that the Italian economy has contracted now for seven consecutive quarters and the eighth one appears to be under way. France reported much lower than expected inflation of 0.8% y/y in April, and mirrors the trends seen in Germany and the wider euro zone. The mix of slower growth and further disinflation (moving towards outright deflation) will surely fan expectations of further ECB actions, which Draghi has pledged it stands ready to do. They finish by writing, “We believe the ECB has entered string-pushing territory, but at the very least, market reaction (selling the euro) should help the euro zone economy at the margin, perhaps more than another symbolic cut in the refi rate would. A weaker euro is needed now, not a stronger euro.”