The Jump in EUR/USD Stalls as Disappointing Data from Europe Piles Up

EUR/USD has turned bearish since late December, falling around 350 pips as it reached 1.08 lows early this morning. But that’s not much considering the negative economic data from the Eurozone Germany and probably in Europe. Today’s German GfK Consumer Sentiment showed further deterioration as listed below, after yesterday we saw a similar case from the German Business Sentiment indicator yesterday.

So, a negative sentiment continues to swirl the German economy as we start 2023, which killed right away any prospects for an economic comeback, particularly in the consumption sector. This is the lowest reading in 10 months after the unexpected decrease today. This also confirms the difficulty among German consumers, as high prices and tighter financial circumstances due to high interest rates continue to be a drag.

Germany February GfK Consumer Sentiment

• February GfK consumer sentiment -29.7 points vs -24.5 points expected
• January GfK consumer sentiment -25.1 points; revised to -25.4 points

GfK noted that:

“If there were any hopes of a sustained recovery in sentiment, these were dashed in January. The consumer climate suffered a severe setback at the beginning of the year.”

However, we saw a 70 pip jump in EUR/USD during the European session, as European equities were making some decent gains, with shares of luxury companies rising after LVMH exceeded revenue expectations in Q4 of 2023. That improved the sentiment for the Euro but the jump stalled at the 200 SMA (purple) on the H4 chart, which has been acting as resistance. So, this looks like a good opportunity to sell EUR/USD.

The German central bank, the Bundesbank, presented its monthly report today, indicating that the economy will likely stagnate throughout the current quarter, which is bearish for the Euro. However, the Euro is keeping the gains, as ECB members kept popping up during the European trade, with Vujčić saying that there was no dovish tilt by the ECB yesterday, while Šimkus added that he is confident that the data will not support a rate cut in March.

EUR/USD Live Chart