Euro Jumps After Germany Factory Orders Surge
Germany is the largest economy in the European Union with a GDP of $3.45 trillion dollars. This makes it the fourth largest economy in the world after the United States, China, and Japan.
Germany is known for its industrial production. It is the home to some of the largest engineering firms in the world. Most prominently, it is known for its automobiles. Vehicle companies like Mercedes, Porsche, Volkswagen, and BMW are known around the world for their quality, durability, and class. Germany is also known for the manufacturing of various products in power, energy, and healthcare.
As a result of all this, Germany is one of the countries with a big trade surplus. In 2017, the country’s trade surplus fell for the first time since 2009. It had a trade surplus of more than $300 billion. It has a $64 billion trade surplus with the United States. A trade surplus is got when a country exports more goods than it imports. Part of the reason for the big trade surplus is because of Germany’s reluctance to consumption.
Germany is also the biggest country in the European Union. It is followed by France which has a GDP of $2.46 trillion. Therefore, when Germany develops some problems, they tend to affect the entire region.
Today, the country released the factory orders for the month of May. The data showed that new orders climbed 2.6 per cent in May from April on a fully adjusted basis, while the decline of 1.6 per cent in April from March was less bad than the 2.5 per cent fall originally forecast.
This data is an indication that the economy – which depends mostly on industrial production – is doing better than many people expect.
However, it could also be an indication that people and companies are increasing their spending before the European Union and the US get into a full-blown trade war.
Angela Merkel addressed this issue yesterday when she addressed parliament. In her speech, she said that although the country had initiated tariffs on US-destined steel and aluminum, she was hopeful that the trade conflict would not result into a real trade war. She also said that the country was prepared to put additional tariffs on US goods if Donald Trump goes ahead with his threat to place tariffs on German cars. Estimates show that a company like BMW would lose more than $400 million per year.
In response to the improved data from Germany, the Euro jumped against the dollar and reached an intraday high of 1.1710 as shown below. The upward trend could continue especially if the US job numbers disappoint and if the Fed minutes sound dovish. Going by the statement released after the Fed meeting, the latter is not likely.
Meanwhile, in Switzerland, the franc gained immediately after the CPI data were released. The data showed that the June CPI was at 1.1% which was in line with expectations and higher than last month’s CPI. On a MoM basis, the CPI numbers declined to 0.0%, which was worse than the expected 0.1%.