Eurozone Q1 GDP was revised up to 0.6% q/q from 0.5% q/q reported initially, and Q4 last year was also revised higher to 0.4% q/q from 0.3% q/q. This means the trajectory is better than initially thought, which backs the ECB view that the recovery remains on track, even if Q1 data have to be taken with a pinch of salt and are likely to be followed by a relatively weak number for Q2.
The breakdown showed that private consumption growth accelerated strongly to 0.6% q/q from 0.3% in Q4 and was the biggest single contributor to the strong quarterly growth rate, which may partly be due to the Easter Effect. Fixed gross investment growth slowed, but still contributed 0.2% points, and government consumption a further 0.1% points, while net exports detracted 0.1% points. Again strong numbers, that will back the ECB’s wait and see stance, even if confidence indicators point to a slowdown ahead.
EURUSD has been reacting favorably to the numbers while the fact that Fed Chair Yellen didn’t put any specific date on the rate hike pressures the USD. Price has been moving higher from a support at 1.1360 and is now at minor resistance at 1.1380. The next significant resistance lies at 1.1445 while some minor resistance exits at 1.1404 – 1.1415.
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Chief Market Analyst
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