EUR/USD Higher as German GDP Rebounds

EUR/USD has posted gains in the Tuesday session. Currently, EUR/USD is trading at 1.1867, up 0.22% on the day.

Germany is the locomotive of the eurozone, which means that investors are closely attuned to the health of the country’s economy. The second quarter saw economic growth fall across the globe, as Covid-19 caused a severe economic downturn. The good news is that economic growth has rebounded sharply in the third quarter. Earlier in November, the euorozone released its GDP report for the second quarter. GDP grew by 12.6% in Q3, recovering from a plunge of 12.1% in the second quarter. It was a similar story in Germany, which bounced back in Q3 with a GDP of 8.5%, above the forecast of 8.2%. This did not mark a complete recovery from the Q2 reading of -9.7%, but the rebound satisfied investors, who have given the euro a thumbs-up on Tuesday.

The eurozone was hit hard by the Covid pandemic, which took its biggest toll in the second quarter. Health regulations, which included lockdowns, paralysed the services industry. Manufacturing also contracted, as global demand slumped, which led to a huge reduction in exports. The manufacturing sector has since moved back into expansionary territory, with readings above the neutral-50 level. In October, German PMI was almost unchanged at 57.9, while eurozone PMI came in at 53.6.

It has been a different story entirely for the services sector, as business activity continues to head lower. In Germany, Services PMI fell to 46.2, down from 48.9 beforehand. The eurozone PMI slowed to 41.3, down sharply from 46.2 in the previous release. With the expected rolling out of Covid vaccines in the next few months, economic activity should increase and boost the services sector.