German GDP revived pessimism on future growth

Despite a slight slowdown in the second quarter from 0.7% to 0.6%, the German GDP growth hit the strongest level since 2012 on yearly basis. German economy expanded by 2.1% year-on-year (adjusted for working days), up from 1.7% printed previously and beating 1.9% expected by analysts.

Yet, the twelfth consecutive quarter growth in Germany failed to revive the euro-bulls in Europe. The EURUSD traded down to 1.1721, as traders mainly reacted to the softer quarterly read which belonged to a period of top manufacturing PMI data releases.

As a consequence, the recent downturn in the PMI figures somewhat hint that the third quarter growth could show further slowdown, hence could compromise the pace of economic growth later this year. The latter reasoning is believed to explain the euro’s knee-jerk reaction to a softer-than-expected quarterly read, rather than enthusiasm on a five-year-high year-on-year performance.

Bloomberg analysts expect the 3Q GDP to ease to 0.5%, the 4Q GDP to 0.4%.