Data of a mixed nature has been pouring in for investors to digest. Disappointing figures from Google (NASDAQ:GOOGL) and Samsung (LON:0593xq) and weaker than forecast Chinese manufacturing pmi data overnight have cast a shadow over the markets on Tuesday. However, the eurozone has (unusually) been providing a ray of light across the otherwise gloomy outlook.
The eurozone has been through a lot recently; Brexit, impact from US – China trade war, political clashes (think Italy & Brussels) and a downturn in German manufacturing. However, today’s data indicates that the bloc could avoid being dragged into a recession, which had looked plausible not so long ago.
Data highlights:
EZ GDP +1.2% yoy vs. 1.1% exp.
Italy GDP +0.1% yoy vs. -0.1% exp.
EZ Unemployment 7.7% vs. 7.8% exp.
German CPI +2% vs. 1.5%
Italy avoids recession, FTSE MIB gains
Italy’s GDP expanded by 0.2% in the first three months of the year, following on from a 0.1% contraction from the third and fourth quarter. News that Italy has emerged from recession in the first quarter has been well received by the populist government in Rome as they struggle to implement tax cuts and changes to spending.
Whilst this is clearly a well needed win for the Italian coalition government, the long-term picture is still shaky at best; Italy remains the sick dog of the eurozone. Investors were willing to look beyond this today.
The FTSE MIB jumped higher following the release. The Italian index is leading the charge in Europe up over 0.4% in the early afternoon.
Spain, was a standout winner, economic growth in the region grew an impressive 0.7% quarter on quarter, in line with its post eurozone crisis average rate. The IBEX was also on the rise, up 0.3% on the day.
Will the ECB lose the dovish accent?
One quarter’s worth of data by no means constitutes a new trend. The big question here is whether today’s data is the start of a meaningful rebound for the bloc’s? The answer is, it’s just too soon to tell. The ECB are unlikely to change their current position. However, policymakers will be watching carefully to see whether the momentum continues.
Can Eurozone CPI replicate Germany’s jump?
Eurozone inflation data is due on Friday. We could be expecting stellar figures if German inflation data is anything to go by. German inflation hit the 2% sweet spot thanks to an increase in travel and energy costs. Should inflation in the eurozone also jump higher thaN the 1.6% forecast, euro traders could start to get excited and put the bulls back in charge.
The euro has rallied through $1.12 and is currently trading at its peak of $1.1228. Crossing the 50 SMA on the four-hour chart and with the RSI edging higher, the technical picture is improving.
The euro will now test resistance at $1.1230 before $1.1255 and $1.1180. On the downside support can be seen at $1.176 before $1.1140 and $1.1110.
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