Strong euro area data and weak US reports supported EURUSD gains

Economic data remains on the side of the weak dollar, especially contrasting with the brisk eurozone statistics today.

Germany is reporting a 91k drop in the number of unemployed in July – the sharpest drop in 15 years and three times stronger than expected. Consumer prices in Germany and Spain also came in better than expected, showing an acceleration in annual rates to 2.9% and 3.8%, respectively.

This strong data has the potential to put the issue of tapering of stimulus measures in Europe back on the agenda sooner than markets have priced in, supporting demand for the single currency. EURUSD is increasingly confident of forming a ‘bottom’, bouncing off a support area.

The US was unexpectedly on the other end of the spectrum, producing data weaker than expected. The first estimate of GDP for the second quarter saw an increase of 6.5%, weaker than the expected 8.5% and almost identical to the growth of the first quarter (6.3%).

This is a high rate, but not much in line with the optimism of Powell that we heard yesterday. Separately from this, weakness was reflected by initial jobless claims and home sales data.